The paper deals with the development and main determinants of the profitability of Czech dairy farms. The aim of the paper is to evaluate the differences in the dynamics of profitability for two types of milk producers – specialized dairy farms and mixed farms – within the context of the agricultural policy changes. This aim is achieved by decomposing profitability into output growth, output and input price changes, changes in decoupled subsidies, technical change, scale, mark-up, and technical efficiency change components based on input distance function estimation. Based on the panel data obtained from the FADN database in the time period 2004–2011, it was found that the change in profitability was positive in the analysed time period, and slightly higher for the specialized dairy farms than for the mixed ones. The changes in output price, mark-up component and technical change are the main determinants of the development of profitability. Agricultural policy measures had different effects on these components. The strongest correlation was between the operational subsidies and the technical change and technical efficiency change, and this correlation was negative.
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