The article is devoted to the study of the constituent factors of the environment of business entities in the dairy industry and to identify the vector of their impact on the efficiency of economic activity.

It is substantiated that the urgency of the study of the environment of business entities in the dairy industry is due to the possibility of developing effective development strategies. The significant influence of political and legal environment on the sustainability of the dairy industry, especially state support tools. It is argued that the economic conditions for the functioning of dairy farming are mainly threats, the manifestation of new opportunities will occur under the condition of increasing the average per capita income, improving the raw material base.

The duality of the influence of social factors on the development of dairy farming, with a predominance of positive, and strategic priorities of social policy should be - improvement of rural areas, changing the declining population and the outflow of highly qualified professionals, attractive employment for young professionals.

It was revealed that the level of technical and technological support of the dairy industry is insufficient, which increases the negative impact on the effective development of economic entities. The factors that hinder the effective development of agricultural producers for milk production are systematized: low efficiency and lack of systematic state support - 74% of respondents; manifestation of price disparity - 50.1%; critical condition of material and technical base - 48.3%; low opportunities for expansion of agricultural lands - 46.7%; lack of qualified personnel - 45.9.

The measures to be taken by the management of agricultural enterprises to eliminate the negative impact of adverse factors have been identified: 53.2% of respondents plan to take measures to improve product quality; 42.3 - to improve the technological process of production (milking, feeding, maintenance); 26.5% - increase the number of cows and improve the breed composition; 16.9% - to modernize farm buildings; 14.2% to improve working conditions.

The competitive environment of functioning of agricultural enterprises on milk production on the basis of use of model 5 of forces of competition is investigated and the level of competition among commodity producers is defined, influence of force of suppliers and buyers, threat of emergence of new competitors, presence of milk substitutes is defined.

Key words: dairy cattle breeding, environment of functioning of agricultural enterprises, environmental factors, competitive environment.