Chile Dairy and Products Annual 2007

Chile - By USDA, Foreign Agricultural Service - This article provides the dairy industry data from the USDA FAS Livestock and Products Annual 2007 report for the Voluntary Annual Report from Chile. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.
calendar icon 3 November 2007
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USDA Foreign Agricultural Service

Report Highlights:

Chile’s dairy production this year is expected to expand due to an increased number of cows and productivity of the herd. An increase in milk prices paid to farmers due to an increase in international prices for dairy products is expected to expand output in the coming years.

Executive Summary

Chile’s milk production is expected to increase in 2007 (Jan-Dec). A significant increase in the prices paid to producers together with an increasing number of cows and productivity of the milk-producing herd and fair weather in most producing areas, are the main factors for the larger output. Domestic milk prices are an important factor that affects total milk output. Additionally weather is an important factor for pasture production, Chile’s basic feed input. The outlook for the next three-to-five year’s milk production also will depend on international dairy prices, government policies, and continued improvements in technology and animal genetics.


Production General

Chile’s total milk output rose a modest 4 percent from 2.30 billion in 2005 to 2.40 billion liters in 2006, mainly due to an increase of the number of cows and productivity of the milkproducing herd. Additionally, climatic conditions in the primary dairy producing regions of the country were another factor which affected total production positively.

As a result of low domestic milk prices paid to producers during the last two years farmers were in the process of reducing their production herd and consequently total output milk output fell during the first semester of 2007 when compared to the previous year. But as a result of a significant price increase, paid to producers during the first half of CY2007 together with good weather in the main milk-producing region, which had a positive effect on pastures, milk production is expected to increase only slightly in MY2007 to 2.44 billion liters, from 2.40 billion liters in 2006. Domestic milk prices have increased due to a significant increase observed in international milk prices during the end of CY2006 and beginning of 2007. Chile currently has an estimated 16,000 dairy farmers with approximately 630,000 cows in production, of which 80 percent are considered small producers and the whole dairy industry employs directly and indirectly an estimated 35,000 persons.


Chile became a net exporter of dairy products in CY2004, the dairy industry’s exports exceeded imports in volume and value. In CY2006 the trade balance increased when compared to the previous year, in volume and value. The trade balance exceeded US$43 million. Latin American countries are the main destination for Chile’s dairy exports. Reportedly, the industry’s goal is to export over US$200 million in milk and dairy products in 2007.


Although Chile bound its dairy product import duties (HS 04.02, 04.05, 04.06) at 31.5 percent in the Uruguay Round, a flat import tariff of 6 percent is applied on nearly all imported dairy products. Additionally, a value-added tax of 19 percent is charged at the consumer level on all goods, domestic or imported. Chile has reduced import duties only for Colombia and the United States for whole and non-fat dry milk as a result of the Free Trade Agreements with these countries. Non-fat dry milk enters duty free in 2007 and whole dry milk will be tariff free in 2011. Colombia will have duty fee access for both, whole and nonfat dry milk by 2012. For all other countries that have signed agreements with Chile, dairy products are excluded from the tariff reduction schedule.

As a result of Chile’s trade agreements, the dairy industry expects to increase its export market share. The US – Chile FTA provides for a 3,500 metric ton duty free quota for Chilean dairy products. This volume increases 10 percent each year until Chile gains duty free access in 2016. The agreement with the EU offers a duty free quota of 1,500 Tons, with a yearly increment of 5 percent. The agreement reached with South Korea gives only a 1,000 Metric Ton duty free quota for whey powder, but there is an agreed upon reduction in the high duties for dairy products like yogurt and cheese in 10 years. Duties applied to these products are 40 and 38 percent respectively. No preferences were agreed for dairy products in the Chile-Japan trade agreement.

The effort to increase domestic consumption of milk and milk products continues with a promotional campaign, which is evenly financed by the producers, the industry and the government. These three players have agreed to form and finance an association (Promolac), which spends approximately 900 million Chilean pesos (US$1.5 Million) on the publicity campaign in CY2004, increased it to 1,200 million Chilean pesos (US$2.1 Million) in 2005 and the budget was reduced to only an estimated 600 million pesos (US$1.1 Million) for CY2006 and the same figure for 2007. Promotion of fresh milk consumption is mainly through TV and printed media.

Due to an influx of dairy imports mainly from Argentina, the GOC imposed safeguard measure against Argentinean dairy product imports. The share of imports from Argentina increased from 35 percent in 2005 to over 75 percent in 2006. The imposed safeguard rate, which came into effect October 13, 2006, was 23 percent. But as a result of significant increases of dairy product prices the GOC decided in July of 2007, to suspend the safeguard measures temporarily and left an option to re-impose the measure if it becomes necessary.

Whole Dry Milk


Close to 90 percent of Chile’s production of dry milk is whole milk powder. Production of whole dry milk increased again in CY2006 when compared to the previous year but not much as previously estimated, as demand and production for other dairy products (butter, cheese and yogurt) outgrew increases of milk deliveries to the industry. For 2007, the industry does not expects whole dry milk production to increase, as consumption and export demand for other milk products increased more than demand for dry milk.


Dry milk is available for sale in practically all Chilean supermarkets and smaller grocery stores. Families that do not consume large quantities of milk or lack refrigerators to keep UHT fresh after opening prefer dry rather than fluid milk. Ultra high heat treated milk (UHT milk) is very common in Chile because you can store the containers for long time without refrigeration, but once opened the containers have to be kept in refrigerators. Government food programs also account for a significant proportion of dry milk consumption. Government tenders for dry milk may be filled by either domestic or imported product. During the winter months, the industry reconstitutes fluid milk from dry milk produced during the summer, in order to produce dairy products that have a constant demand throughout the year.


Higher international prices together with an expected increase in domestic milk production, is expected to result in a fall of imported dry milk in 2007.

Chile's dry milk export markets are expected to expand in the coming years as the industry becomes more competitive and the price incentive increases. In the long-term, Chile's success in the dairy export market will depend upon its ability to compete with other countries. Chile’s main export markets are in Latin America, particularly Cuba, Mexico, Brazil and Bolivia.

Nonfat Dry Milk


Chile’s NFDM production increased again in 2006, as milk output increased. Production in the coming years will depend on expected prices in international markets and changes in food industry consumption or specific strategies from individual industries.


Chile’s food industry determines to a great degree the consumption level of NFDM in Chile. Leading products made from NFDM are chocolate, ice cream and yogurt. The consumption rate of these products is in line with Chile’s economic growth. For 2005 and beyond, utilization is expected to continue to increase, but at a slower rate.


After many years Chile imported NFDM (non fat dry milk) from the US in 2006. Competitive US prices for NFDM is the main reason for US milk imports in 2006, according to industry sources.

Further Reading

       - You can view the full report, including tables, by clicking here.

List of Articles in this series

To view our complete list of 2007 Dairy and Products Annual reports, please click here

November 2007

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