Analysis of the elements of production costs as ways to improve the formation processes of dairy farming in order to increase the efficiency of its development are revealed in the given research.

The basis of the agricultural sector of Ukraine is agriculture. Since the mid 90's farming Ukraine has undergone great changes. Free market economy replaced the planned economy. The country suffered a severe economic crisis, which led to a decline in production in all sectors of agriculture, especially in livestock industry.

An integrated approach of research aspects of production costs of agriculture, especially dairy industry will improve the efficiency of production, make a reasonable offer on the operational management of production costs.

Generalized practice of dairy farming allows to draw conclusions that the main prospects in Ukraine dairy farming in the context of the integration of this sector into the global economy is implementing dairy based economy with further processing of big industrial enterprises. Small-scale sector has no future in resolving questions concerning the formation of dairy raw materials for industrial processing.

Studies show that dairy industry is developing a rather high level of profitability when the economy is of 400 cows or more. This is due to the fact that in a large industrial plant (due to greater opportunity to attract certain economic factors, economic use of equipment, improving manufacturability and production of new, energy-efficient technologies) increase in output leads to a decrease in fixed costs of capital, therefore, reduce of the unit cost of the final product.

The main task at this stage is to develop and implement the necessary measures to increase milk production, reducing its cost. The main factor to achieve these goals in the first place is to increase the productivity of dairy cattle.

It should be noted that the organization of production processes in dairy farming an important decision is to develop technical and organizational level of the production process, such as the scale of production, in production capacity, the form of the process - the kind and type of production. Through their production costs, namely the question of technology, it affects the outcome of management - profit.

Economic mechanism of production costs is a systematic account of the influence of elements and their combination to produce products with minimum cost to maximize efficient production.

Dairy cattle, both in the country as a whole, and directly in farms Cherkasy region for integration in a civilized market economy it is necessary to carry out the level of intensification, concentration and specialization of production, introduce advanced technologies in production processes that will be help increase animal productivity, increased productivity labor and reduce production costs.

Key words: production costs, dairy cattle, food security.