Over the last 7 years, the transformation process has led to drastic changes in the structure of the Bulgarian agricultural sector, and especially to a dramatic fall in milk production. Hence results the great importance of studies that analyse the general conditions of the agrarian sector as well as the economic situation of agricultural enterprises. This discussion paper presents the results of a study of the economic situation of milk production farms, which was carried out in the oblast Burgas, in the south east of Bulgaria. The aim of the investigation was the detailed analysis of the situation of Bulgarian milk production enterprises with respect to their production technologies and economic results. In addition, the comparative advantages and disadvantages of milk production in Bulgaria are discussed using a production costs comparison of Bulgarian and German milk production enterprises. The results show firstly the low level of Bulgarian milk production, and secondly the existing differences between the types of production equipment used by various legal forms of enterprises. The impact this has on the level of production costs and on the factor productivities is also pointed out in the paper. The comparison with German enterprises makes clear that the Bulgarian farms analysed have higher costs for forages and a lower labour productivity. These disadvantages will be partly compensated by the low level of labour costs, as well as by investments in the Bulgarian enterprises.