For the past 12 years, drought limited pasture for grazing and forced down milk production. In MY2021 milk receipts remained flat at 1,171 million liters. However, domestic demand for dairy products remains strong, pushing up total imports 35.8 percent in MY2021. The United States is the main supplier of dairy products to Chile with a 21.6 percent market share in MY2020. In MY2022, Post estimates that whole milk powder production will increase by 10.8 percent to reach 72,000 metric tons.

Imports will also increase to 9,000 MT to cover domestic consumption. Post projects MY2022 skim milk powder production to increase by 6.3 percent to 17,000 MT, while imports remain flat at 10,000 MT

From January to July MY2021, average monthly producer prices were relatively high compared to MY2020 (see Figure 1). According to sources, milk producer prices in general have increased since 2020 due to intensification of competition between dairy processing companies, which are trying to attract producers. Producers expect that the farmgate milk prices will remain strong throughout 2021
and the beginning of 2022. For the past 12 years, drought limited pasture production and thus, milk production. In MY2021
(January to July data), total milk receipts remained flat at 1,171 million liters (see Table 1). Milk receipts in all regions, except for Los Rios, decreased (see Figure 2). The decrease in milk receipts in those regions is due to lower milk production. When pasture availability is low, producers complement pasture with feed; however, now feed prices are also increasing, raising production costs and pushing
production down. Domestic demand for dairy products remains strong, which is evidenced by the 35.8 percent increase in dairy imports in MY2021 (see Table 2).

Los Lagos and Los Rios regions hold most of the processing facilities and dairy farms in Chile. These regions are in the southern part of the country and have abundant rainfall and natural pasture which allows them to naturally graze cattle. Los Lagos region processed 525 million liters of milk from January to July 2021, which represents 44.9 percent of Chile’s total milk processing volume (see Figure
2). Likewise, from January to July 2021, Los Rios processed 378 million liters which represents 32.2 percent of the processed milk in Chile.

In MY2021 (January to July data), production of high value-added products such as cheese, cottage cheese, yoghurt and skim milk powder increased over MY2020 (see Table 1). There are 31 major dairy processing plants in Chile, and seven of them produce milk powder. Milk receipts and processing is concentrated in few processing plants, the three largest processing plants process 49.4 percent of the Chilean milk production (MY2021 data). Additionally, there 111 small dairy processing plants that process around 181 million liters of milk per year and which mainly produce fluid milk and cheese.

In September 2021, the New Zealand company Fonterra announced its plans to sell all assents in Chile and focus on extracting more value from New Zealand milk. Fonterra currently owns 99.89 percent of the shares of Soprole and Prolesur, and is the second largest dairy producer in Chile, processing more than 20 percent of Chilean milk production. According to company sources the process could take up to two years and it should not affect the company’s regular operations. However, Chilean dairy prooducers expressed a natural concern due to the uncertainty that emanates from the announcement.

In MY2021 (January to July data), Chile’s dairy imports increased by 35.8 percent in value. In MY2021 dairy imports from the United States increased by 20.4 percent over MY2020. The United States was the main supplier of dairy products to Chile in MY2020 with a 21.6 percent market share and $88.7 million worth of exports (see Table 2). Argentina in the second largest supplier with a 19.8
percent market share, and New Zealand is the third with a 15.2 percent market share. Top Chilean dairy imports from the United States are cheese, malt milk ingredients, milk powder, and whey (see Table 3). Chilean imports of dairy products in general increased during the pandemic due to strong demand from consumers and the dairy processing industry, which could not be fulfilled entirely
with Chilean dairy production.

Dairy labeling law update: On November 2, 2019, the government of Chile approved Law 21176 that establishes standards for manufacturing, naming, and labeling of milk products or products derived from milk, according to the different technological treatments of milk. The dairy labeling law applies to milk and dairy products and includes the requirement to specify the origin of the raw milk used to manufacture the product. Packaging must be marked with the image of the corresponding flag or flags.

Implementation of the Law was scheduled for August 2, 2020, but was postponed as the implementing regulation remains incomplete. Post is unclear on when this measure will be implemented. Fortification of milk and dairy products with vitamin D: On September 8, 2021, Chile notified the WTO of a proposed modification of the Sanitary Food regulation. This new regulation will incorporate the
requirement of fortification of milk and dairy products with vitamin D. The proposed modification is currently open for public comments until October 23, 2021. For more information refer to the WTO notification.

Whole milk powder production peaks from October through January (see Figure 3). Seven dairy processing plants in Chile produce whole milk powder and production is sold mainly in the domestic market. From January to July 2021, production totaled 28,669, a 13.2 percent decrease over the same period in 2020. Whole milk powder production reached 72,679 MT in MY2020. Labor costs, gas
prices and milk prices are up. For MY2021, Post estimates whole milk powder production will reach 65,000 MT a 11 percent decrease over MY2021, due to increased costs of production. In MY2022, Post estimates that production will increase by 10.8 percent and reach 72,000 MT as the economy recovers as COVID-19 pandemic restrictions ease off. This assumes strong U.S. dollar keeps prices for dairy products high and facilitates exports.

Post estimates Chile’s consumption of whole milk powder at 78,000 MT in MY2021 a four percent increase over MY2020. The increase is tied to continued strong demand for dairy products in 2021. Demand for dairy products is inelastic and remained strong during the COVID-19 pandemic. Post expects that domestic consumption will pull from existing stocks as production slides lower.

For MY2022 Post projects domestic consumption at 79,000 MT in MY2021, a 1.2 increase over MY2020, following the recovery of the Chilean economy and the re-opening of food service. Domestic consumption consists of powdered milk, sold mainly in retail, but also in food service. Additionally, dairy companies produce a variety of dairy products using milk powder such as cheese, yoghurt, and

Post estimates Chilean whole milk powder imports to decrease by 11 percent down to 8,000 MT in MY2021, but bounce back to 9,000 MT in MY2022 to fulfill domestic demand for dairy. In MY2021 (data from January to July), Chilean imports of whole milk powder reached 4,428 MT, a 30.1 percent decrease over MY2020, due to currency fluctuations. Imports from all countries, except Uruguay,
decreased in this period.

In MY2021, Chile’s main supplier of whole milk powder was Uruguay, followed by New Zealand and Argentina (see Table 5 and Table 6). In MY2020, imports from New Zealand increased rapidly, and reached 3,640 MT, becoming the main supplier in MY2020.
Post expects Chilean whole milk powder exports to decrease to 1,000 MT in MY2021 due to the decrease in production. In MY2022, Post projects exports to increase to 2,000 MT as production recovers and export demand from Latin American countries continues to improve.
From January to July 2021 Chilean exports of whole milk powder decreased by 73.9 percent over the same period in 2020, totaling 363 MT (see Table 7). Cuba, Bolivia, and Colombia are the main destinations for whole milk powder. China was the top market destination in MY2019 and MY2020, but in MY2021 there were no exports to that market between January and July.

In MY2020 and the beginning of MY2021, stocks in general increased due to logistical and shipping delays that originated from the COVID-19 pandemic. In MY2021, as logistics normalize, Post estimates whole milk powder stocks to decrease from 7,000 in MY2020 to 1,000 MT and remain at 1,000 in MY2022 assuming a return to normal shipping conditions.

Chile’s skim milk powder production totaled 14,133 MT in MY2020. In January to July 2021 skim milk powder production increased to 6,014 MT which represents a 29.6 percent growth over the same period in 2020. Post estimates MY2021 skim milk powder production to increase by 13.2 percent to 16,000 MT following the increasing production trend. Post projects MY2022 production to increase
further to 17,000 MT to cover domestic consumption needs (see Table 9). Skim milk powder production in Chile peaks during in November – January following fluid milk production and pasture growth (see Figure 4). In MY2021, production in January was particularly high following the increase in fluid milk production (and milk receipts) that came from good climatic conditions that favored pasture production in the winter and spring of MY2020.

Demand for skim milk powder from Chilean processing companies in MY2020 totaled 25,000 MT. In MY2021, Post estimates consumption will increase by four percent to 26,000 MT given the strong demand for dairy products and the increase in skim milk production observed in January 2021. Post projects MY2022 consumption to increase further up to 27,000 MT as the economy recovers. Dairy processing companies use skim milk powder to produce a variety of products including yoghurt,
desserts, ice cream, and chocolates.

In MY2021, Post estimates Chilean imports of skim milk powder to decrease by 26.7 percent to 10,000 metric tons. In MY2022, Post projects imports will remain flat at 10,000 MT, assuming domestic consumption is met by increased production of skim milk powder and by pulling from existing stocks. Chile’s imports of skim milk powder decreased by 19.8 percent from January to July 2021 over the
same period in 2020 reaching 6,026 MT (see Table 10). The United States is the top supplier of skim milk powder with an 85 percent market share in Chile. However, imports from the United States decreased by 8.4 percent in January to July 2021, compared to the same period in 2020 due to increased domestic production and a high value of the U.S. dollar. In contrast, Chilean exports of skim milk powder increased by 55.8 percent from January to July 2021 over the same period in 2020 totaling 667 metric tons. Brazil is the top market for Chilean skim milk powder (see Table 12 and Table 13).

Chile does not keep high stocks of skim milk powder, however in MY2020 and MY2021 stocks in general increased due to logistical delays in transport and in shipments that originated from the COVID19 pandemic. In MY2021, Post estimates skim milk powder stocks to decrease by 33.3 percent to 2,000 MT and decrease again to 1,000 in MY2022, as logistical problems disappear.