Required Report - public distribution

**Date:** 10/13/2006

**GAIN Report Number:** CI6031

CI6031

**Chile**

**Dairy and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Joseph Lopez, Agricultural Attaché

Office of Agricultural Affairs

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

Chile's dairy production this year is expected to expand. Good weather
conditions improved forage production and milk productivity. An increase
in milk prices paid to farmers due to an increase in export demand for
dairy products is expected to expand output in the coming years.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Production General 3](#production-general)

[TABLE - Dairy Production 3](#table---dairy-production)

[Trade 4](#trade)

[Policy 4](#policy)

[TABLE-Chilean Tariff Reduction Schedule for Whole Dry Milk 0402.2118
4](#table-chilean-tariff-reduction-schedule-for-whole-dry-milk-0402.2118)

[TABLE-Chilean Tariff Reduction Schedule for Nonfat Dry Milk 0402.2118
5](#table-chilean-tariff-reduction-schedule-for-nonfat-dry-milk-0402.2118)

[Whole Dry Milk 6](#whole-dry-milk)

[Production 6](#production-1)

[Consumption 6](#consumption)

[Trade 6](#trade-1)

[PSD Table 7](#psd-table)

[Import Trade Matrix 8](#import-trade-matrix)

[Export Trade Matrix 8](#export-trade-matrix)

[Nonfat Dry Milk 9](#nonfat-dry-milk)

[Production 9](#production-2)

[Consumption 9](#consumption-1)

[Trade 9](#trade-2)

[PSD Table 9](#psd-table-1)

[Import Trade Matrix 10](#import-trade-matrix-1)

[Export Trade Matrix 10](#export-trade-matrix-1)

# Executive Summary

Chile's milk production is expected to increase in 2006 (Jan-Dec). Good
prices paid to producers together with good weather conditions, which
improved forage supplies, 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 years milk production also will depend on international
dairy prices, government policies, and continued improvements in
technology and animal genetics.

# Production

## Production General

Chile's total milk output in CY2005 rose from 2.25 billion to 2.30
billion liters, mainly due to an increase in productivity in the
milk-producing herd. Good climatic conditions in the primary dairy
producing regions of the country, together with higher prices paid by
the dairy industry during the last few years, were the main factors
affecting total production. Better prices paid to producers by the
domestic milk industry allowed a larger number of producers to use
supplemental feeding with concentrates to make up for deficiencies in
their pastures to increase the production level of their herds.

As a result of good price paid to producers in 2004 together with good
weather in the main milk-producing region, which had a positive effect
on pasture, production of milk is expected to increase another 4 percent
in MY2006, to 2.40 billion liters. Chile currently has an estimated
49,000 dairy farmers with approximately 620,000 cows in production.

+------+-------+------+------+------+------+-------+-------+-------+
| ###  |       |      |      |      |      |       |       |       |
| TABL |       |      |      |      |      |       |       |       |
| E -  |       |      |      |      |      |       |       |       |
| Dair |       |      |      |      |      |       |       |       |
| y Pr |       |      |      |      |      |       |       |       |
| oduc |       |      |      |      |      |       |       |       |
| tion |       |      |      |      |      |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+
|      | Total | F    | Dry  | Bu   | Ch   | Fa    | Y     | Co    |
|      |       | luid |      | tter | eese | rmers | ogurt | nden. |
|      | Rec'd |      | Milk |      |      |       |       |       |
|      | by    | Milk |      |      |      | C     |       | Milk  |
|      | Ind   |      |      |      |      | heese |       |       |
|      | ustry |      |      |      |      |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+
| Year | \--Mi |      | \-\  |      |      |       |       |       |
|      | llion |      | -\-\ |      |      |       |       |       |
|      | Lite  |      | -\-\ |      |      |       |       |       |
|      | rs\-- |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-- |      |      |       |       |       |
|      |       |      | Thou |      |      |       |       |       |
|      |       |      | sand |      |      |       |       |       |
|      |       |      | Kilo |      |      |       |       |       |
|      |       |      | gram |      |      |       |       |       |
|      |       |      | s\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-\ |      |      |       |       |       |
|      |       |      | -\-- |      |      |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+
|      |       |      |      |      |      |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+
| 1980 | 592   | 127  | 32   | 4    | 13   | 3,868 | 1     | 7,835 |
|      |       |      | ,566 | ,016 | ,902 |       | 5,054 |       |
+------+-------+------+------+------+------+-------+-------+-------+
| 1990 | 890   | 138  | 45   | 6    | 24   | 5,422 | 0,939 | 8,325 |
|      |       |      | ,126 | ,448 | ,513 |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+
| 1995 | 1,358 | 225  | 61   | 6    | 40   | 5,873 | 6     | 8,674 |
|      |       |      | ,418 | ,651 | ,816 |       | 7,663 |       |
+------+-------+------+------+------+------+-------+-------+-------+
| 1997 | 1,497 | 271  | 65   | 9    | 43   | 7,106 | 7     | 1     |
|      |       |      | ,726 | ,582 | ,712 |       | 9,423 | 0,219 |
+------+-------+------+------+------+------+-------+-------+-------+
| 1998 | 1,530 | 269  | 70   | 11   | 46   | 7,631 | 8     | 1     |
|      |       |      | ,877 | ,159 | ,528 |       | 2,243 | 3,244 |
+------+-------+------+------+------+------+-------+-------+-------+
| 1999 | 1,470 | 279  | 60   | 11   | 44   | 7,034 | 10    | 1     |
|      |       |      | ,597 | ,007 | ,777 |       | 0,203 | 5,742 |
+------+-------+------+------+------+------+-------+-------+-------+
| 2000 | 1,447 | 275  | 59   | 9    | 44   | 7,167 | 10    | 2     |
|      |       |      | ,669 | ,855 | ,718 |       | 6,624 | 4,400 |
+------+-------+------+------+------+------+-------+-------+-------+
| 2001 | 1,637 | 291  | 71   | 11   | 50   | 7,150 | 9     | 2     |
|      |       |      | ,464 | ,836 | ,417 |       | 5,249 | 5,418 |
+------+-------+------+------+------+------+-------+-------+-------+
| 2002 | 1,605 | 296  | 67   | 11   | 53   | 7,480 | 12    | 2     |
|      |       |      | ,710 | ,551 | ,075 |       | 7,057 | 4,190 |
+------+-------+------+------+------+------+-------+-------+-------+
| 2003 | 1,563 | 293  | 61   | 10   | 53   | 7,555 | 13    | 3     |
|      |       |      | ,867 | ,849 | ,037 |       | 9,344 | 0,558 |
+------+-------+------+------+------+------+-------+-------+-------+
| 2004 | 1,676 | 289  | 63   | 13   | 58   | 8,296 | 15    | 3     |
|      |       |      | ,633 | ,084 | ,849 |       | 9,828 | 8,698 |
+------+-------+------+------+------+------+-------+-------+-------+
| 2005 | 1,723 | 298  | 62   | 14   | 67   | 1     | 18    | 3     |
|      |       |      | ,792 | ,655 | ,176 | 0,507 | 9,436 | 9,645 |
+------+-------+------+------+------+------+-------+-------+-------+
|      |       |      |      |      |      |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+
| Sou  |       |      |      |      |      |       |       |       |
| rce: |       |      |      |      |      |       |       |       |
| Mini |       |      |      |      |      |       |       |       |
| stry |       |      |      |      |      |       |       |       |
| of   |       |      |      |      |      |       |       |       |
| Agr  |       |      |      |      |      |       |       |       |
| icul |       |      |      |      |      |       |       |       |
| ture |       |      |      |      |      |       |       |       |
+------+-------+------+------+------+------+-------+-------+-------+

## 

## Trade

Chile became a net exporter of dairy products in CY2004, the dairy
industry's exports exceeded imports in volume and value. In CY2005 the
trade balance fell when compared to the previous year, but exports still
exceeded imports in volume and value. Latin American countries are the
main destination for Chile's dairy exports. Reportedly, the industry's
goal is to export US\$150 million in milk and dairy products in 2006.

## Policy

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 will enter duty free in 2007 and whole dry milk will be tariff free
in 2011. Colombia will have duty fee access for both, whole and non-fat
dry milk by 2012. For all other countries that have signed agreements
with Chile, dairy products are excluded from the tariff reduction
schedule.

<table>
<colgroup>
<col style="width: 19%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 10%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><h3
id="table-chilean-tariff-reduction-schedule-for-whole-dry-milk-0402.2118">TABLE-Chilean
Tariff Reduction Schedule for Whole Dry Milk 0402.2118</h3></td>
</tr>
<tr class="even">
<td colspan="10"><h1 id="section-1"></h1></td>
</tr>
<tr class="odd">
<td colspan="10"><strong>Country of Origin 2004 2005 2006 2007 2008 2009
2010 2011 2012</strong></td>
</tr>
<tr class="even">
<td>Bolivia</td>
<td colspan="9">Free of Duty</td>
</tr>
<tr class="odd">
<td>Canada</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>Colombia</td>
<td>6%</td>
<td>6%</td>
<td>6%</td>
<td>5%</td>
<td>4%</td>
<td>3%</td>
<td>2%</td>
<td>1%</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Costa Rica</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>Ecuador</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="odd">
<td>El Salvador</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>U.S.</td>
<td> 5,25%</td>
<td> 4,5%</td>
<td> 3,75%</td>
<td> 3,0%</td>
<td> 2,25%</td>
<td> 1,5%</td>
<td> 0,75%</td>
<td>0</td>
<td> 0</td>
</tr>
<tr class="odd">
<td>Mexico</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>Mercosur</td>
<td colspan="9">Free of Duty</td>
</tr>
<tr class="odd">
<td>Peru</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>EU</td>
<td>6%</td>
<td>6%</td>
<td colspan="7">At the third year a revision of the agreement</td>
</tr>
<tr class="odd">
<td>Venezuela</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
</tbody>
</table>

<table>
<colgroup>
<col style="width: 22%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><h3
id="table-chilean-tariff-reduction-schedule-for-nonfat-dry-milk-0402.2118">TABLE-Chilean
Tariff Reduction Schedule for Nonfat Dry Milk 0402.2118</h3></td>
</tr>
<tr class="even">
<td colspan="10"><h1 id="section-2"></h1></td>
</tr>
<tr class="odd">
<td colspan="10"><strong>Country of Origin</strong> <strong><u>2004 2005
2006 2007 2008 2009 2010 2011 2012</u></strong></td>
</tr>
<tr class="even">
<td>Bolivia</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="odd">
<td>Canada</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>Colombia</td>
<td>6%</td>
<td>6%</td>
<td>6%</td>
<td>5%</td>
<td>4%</td>
<td>3%</td>
<td>2%</td>
<td>1%</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Costa Rica</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>Ecuador</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="odd">
<td>El Salvador</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>U.S.</td>
<td> 5%</td>
<td> 3%</td>
<td> 2%</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td> 0</td>
</tr>
<tr class="odd">
<td>Mexico</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>Mercosur</td>
<td colspan="9">Free of Duty</td>
</tr>
<tr class="odd">
<td>Peru</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
<tr class="even">
<td>EU.</td>
<td>6%</td>
<td>6%</td>
<td colspan="7">At the third year a revision of the agreement</td>
</tr>
<tr class="odd">
<td>Venezuela</td>
<td colspan="9">General Tariff, 6%. Product excluded of tariff
reduction</td>
</tr>
</tbody>
</table>

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.

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 spend
approximately 900 million Chilean pesos on the publicity campaign in
CY2004, increased it to 1,200 million Chilean pesos in 2005 and the
budget was reduced to only an estimated 600 million pesos for CY2006.
Promotion of fresh milk consumption is mainly through TV and printed
media.

Due to an influx of dairy imports mainly from Argentina, which doubled
over the past year, the GOC initiated at the request of the National
Milk Producers' Federation an investigation to determine the possibility
of imposing a safeguard measure against imports. After lengthy
discussions the Chilean Commission of Distortions finally decided on
imposing a provisional safeguard on dried and fluid milk, and Gouda
cheese imports from Argentina only. 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, is 23
percent. The provisional safeguard will be applied for 200 days, during
this time the GOC has to decide on a final safeguard rate or suspend the
measure.

#  {#section-3}

# Whole Dry Milk

## Production

Close to 90 percent of Chile's production of dry milk is whole milk
powder. Production of whole dry milk fell slightly in CY2005, as demand
and production for other dairy products (butter, cheese, yogurt) outgrew
increases of milk deliveries to the industry, production of whole dry
milk fell when compared to the previous year. For 2006, the industry
expects whole dry milk production to increase again, as consumption and
export demand for dry milk is increasing.

##  {#section-4}

## Consumption

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.

## Trade

Low international prices together with an expected fall in domestic milk
production, led to importers' over reaction, which resulted in the
amount of imported dry milk larger than previously estimated in 2005.

Chile\'s dry milk export markets are expected to expand in the coming
years as the industry becomes more competitive. 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.

<table>
<colgroup>
<col style="width: 24%" />
<col style="width: 7%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><h2 id="psd-table">PSD Table</h2></td>
</tr>
<tr class="even">
<td>Country</td>
<td colspan="9">Chile</td>
</tr>
<tr class="odd">
<td>Commodity</td>
<td colspan="6">Dairy, Dry Whole Milk Powder</td>
<td colspan="3">(1000 MT)</td>
</tr>
<tr class="even">
<td></td>
<td>2005</td>
<td>Revised</td>
<td></td>
<td>2006</td>
<td>Estimate</td>
<td></td>
<td>2007</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td>Market Year Begin</td>
<td></td>
<td>01/2005</td>
<td>01/2005</td>
<td></td>
<td>01/2006</td>
<td>01/2006</td>
<td></td>
<td>01/2007</td>
<td>01/2007</td>
</tr>
<tr class="odd">
<td>Beginning Stocks</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>3</td>
<td>3</td>
<td>2</td>
<td>4</td>
<td>4</td>
<td>4</td>
</tr>
<tr class="even">
<td>Production</td>
<td>55</td>
<td>55</td>
<td>47</td>
<td>60</td>
<td>60</td>
<td>54</td>
<td>0</td>
<td>0</td>
<td>58</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Other Imports</td>
<td>5</td>
<td>5</td>
<td>7</td>
<td>5</td>
<td>5</td>
<td>9</td>
<td>0</td>
<td>0</td>
<td>7</td>
</tr>
<tr class="odd">
<td>Total Imports</td>
<td>5</td>
<td>5</td>
<td>7</td>
<td>5</td>
<td>5</td>
<td>9</td>
<td>0</td>
<td>0</td>
<td>7</td>
</tr>
<tr class="even">
<td>Total Supply</td>
<td>64</td>
<td>64</td>
<td>58</td>
<td>68</td>
<td>68</td>
<td>65</td>
<td>4</td>
<td>4</td>
<td>69</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Other Exports</td>
<td>8</td>
<td>8</td>
<td>6</td>
<td>11</td>
<td>11</td>
<td>10</td>
<td>0</td>
<td>0</td>
<td>12</td>
</tr>
<tr class="odd">
<td>Total Exports</td>
<td>8</td>
<td>8</td>
<td>6</td>
<td>11</td>
<td>11</td>
<td>10</td>
<td>0</td>
<td>0</td>
<td>12</td>
</tr>
<tr class="even">
<td>Human Dom. Consumption</td>
<td>53</td>
<td>53</td>
<td>50</td>
<td>53</td>
<td>53</td>
<td>51</td>
<td>0</td>
<td>0</td>
<td>53</td>
</tr>
<tr class="odd">
<td>Other Use, Losses</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Total Dom. Consumption</td>
<td>53</td>
<td>53</td>
<td>50</td>
<td>53</td>
<td>53</td>
<td>51</td>
<td>0</td>
<td>0</td>
<td>53</td>
</tr>
<tr class="odd">
<td>Total Use</td>
<td>61</td>
<td>61</td>
<td>56</td>
<td>64</td>
<td>64</td>
<td>61</td>
<td>0</td>
<td>0</td>
<td>65</td>
</tr>
<tr class="even">
<td>Ending Stocks</td>
<td>3</td>
<td>3</td>
<td>2</td>
<td>4</td>
<td>4</td>
<td>4</td>
<td>0</td>
<td>0</td>
<td>4</td>
</tr>
<tr class="odd">
<td>Total Distribution</td>
<td>64</td>
<td>64</td>
<td>58</td>
<td>68</td>
<td>68</td>
<td>65</td>
<td>0</td>
<td>0</td>
<td>69</td>
</tr>
<tr class="even">
<td>CY Imp. from U.S.</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>CY. Exp. to U.S.</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
</tbody>
</table>

+----------------+-----------------+-----------------+-----------------+
| ## Impor       |                 |                 |                 |
| t Trade Matrix |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Country        | Chile           |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Commodity      | Dairy, Dry      |                 |                 |
|                | Whole Milk      |                 |                 |
|                | Powder          |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Time Period    | Jan-Dec         | Units:          | M.T.            |
+----------------+-----------------+-----------------+-----------------+
| Imports for:   | 2005            |                 | 2006            |
+----------------+-----------------+-----------------+-----------------+
| U.S.           | 0               | U.S.            | 0               |
+----------------+-----------------+-----------------+-----------------+
| Others         |                 | Others          |                 |
+----------------+-----------------+-----------------+-----------------+
| Argentina      | 3093            | Argentina       | 5210            |
+----------------+-----------------+-----------------+-----------------+
| Uruguay        | 2673            | Uruguay         | 130             |
+----------------+-----------------+-----------------+-----------------+
| New Zealand    | 594             | New Zealand     | 49              |
+----------------+-----------------+-----------------+-----------------+
| Brazil         | 288             | Brazil          | 25              |
+----------------+-----------------+-----------------+-----------------+
|                |                 | France          | 13              |
+----------------+-----------------+-----------------+-----------------+
| Total for      | 6648            |                 | 5427            |
| Others         |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Others not     | 0               |                 | 0               |
| Listed         |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Grand Total    | 6648            |                 | 5427            |
+----------------+-----------------+-----------------+-----------------+
|                |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Note: Year     |                 |                 |                 |
| 2006 data are  |                 |                 |                 |
| for January    |                 |                 |                 |
| through August |                 |                 |                 |
| only           |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+

+--------------------+-------------+--------------------+-------------+
| ## E               |             |                    |             |
| xport Trade Matrix |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| Country            | Chile       |                    |             |
+--------------------+-------------+--------------------+-------------+
| Commodity          | Dairy, Dry  |                    |             |
|                    | Whole Milk  |                    |             |
|                    | Powder      |                    |             |
+--------------------+-------------+--------------------+-------------+
| Time Period        | Jan-Dec     | Units:             | M.T.        |
+--------------------+-------------+--------------------+-------------+
| Exports for:       | 2005        |                    | 2006        |
+--------------------+-------------+--------------------+-------------+
| U.S.               | 652         | U.S.               | 63          |
+--------------------+-------------+--------------------+-------------+
| Others             |             | Others             |             |
+--------------------+-------------+--------------------+-------------+
| Cuba               | 1145        | Venezuela          | 1624        |
+--------------------+-------------+--------------------+-------------+
| Argentina          | 824         | El Salvador        | 446         |
+--------------------+-------------+--------------------+-------------+
| Honduras           | 715         | Guatemala          | 324         |
+--------------------+-------------+--------------------+-------------+
| Guatemala          | 680         | Dominican Rep.     | 250         |
+--------------------+-------------+--------------------+-------------+
| Dominican Rep.     | 664         | Cuba               | 200         |
+--------------------+-------------+--------------------+-------------+
| El Salvador        | 527         | Peru               | 92          |
+--------------------+-------------+--------------------+-------------+
| Brazil             | 400         | Bolivia            | 58          |
+--------------------+-------------+--------------------+-------------+
| Venezuela          | 350         | Honduras           | 52          |
+--------------------+-------------+--------------------+-------------+
| Bolivia            | 94          | Switzerland        | 4           |
+--------------------+-------------+--------------------+-------------+
| Trinidad Tobago    | 32          |                    |             |
+--------------------+-------------+--------------------+-------------+
| Total for Others   | 5431        |                    | 3050        |
+--------------------+-------------+--------------------+-------------+
| Others not Listed  | 33          |                    | 1           |
+--------------------+-------------+--------------------+-------------+
| Grand Total        | 6116        |                    | 3114        |
+--------------------+-------------+--------------------+-------------+
|                    |             |                    |             |
+--------------------+-------------+--------------------+-------------+
| Note: Year 2006    |             |                    |             |
| data are for       |             |                    |             |
| January through    |             |                    |             |
| August only        |             |                    |             |
+--------------------+-------------+--------------------+-------------+

# Nonfat Dry Milk

## Production

Chile's NFDM production increased again in 2005, as milk output
increased. Production in the coming years will depend upon expected
prices in international markets and changes in food industry consumption
or specific strategies from individual industries.

## Consumption

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.

## Trade

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.

<table>
<colgroup>
<col style="width: 24%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><h2 id="psd-table-1">PSD Table</h2></td>
</tr>
<tr class="even">
<td>Country</td>
<td colspan="9">Chile</td>
</tr>
<tr class="odd">
<td>Commodity</td>
<td colspan="6">Dairy, Milk, Nonfat Dry</td>
<td colspan="3">(1000 MT)</td>
</tr>
<tr class="even">
<td></td>
<td>2005</td>
<td>Revised</td>
<td></td>
<td>2006</td>
<td>Estimate</td>
<td></td>
<td>2007</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td>Market Year Begin</td>
<td></td>
<td>01/2005</td>
<td>01/2005</td>
<td></td>
<td>01/2006</td>
<td>01/2006</td>
<td></td>
<td>01/2007</td>
<td>01/2007</td>
</tr>
<tr class="odd">
<td>Beginning Stocks</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>3</td>
<td>5</td>
<td>2</td>
<td>2</td>
<td>5</td>
</tr>
<tr class="even">
<td>Production</td>
<td>10</td>
<td>10</td>
<td>12</td>
<td>11</td>
<td>11</td>
<td>14</td>
<td>0</td>
<td>0</td>
<td>15</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Other Imports</td>
<td>5</td>
<td>5</td>
<td>7</td>
<td>5</td>
<td>5</td>
<td>8</td>
<td>0</td>
<td>0</td>
<td>8</td>
</tr>
<tr class="odd">
<td>Total Imports</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Total Supply</td>
<td>18</td>
<td>18</td>
<td>22</td>
<td>19</td>
<td>19</td>
<td>27</td>
<td>2</td>
<td>2</td>
<td>28</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Other Exports</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Total Exports</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Human Dom. Consumption</td>
<td>15</td>
<td>15</td>
<td>17</td>
<td>16</td>
<td>16</td>
<td>22</td>
<td>0</td>
<td>0</td>
<td>24</td>
</tr>
<tr class="odd">
<td>Other Use, Losses</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Total Dom. Consumption</td>
<td>15</td>
<td>15</td>
<td>17</td>
<td>16</td>
<td>16</td>
<td>22</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>Total Use</td>
<td>15</td>
<td>15</td>
<td>17</td>
<td>17</td>
<td>17</td>
<td>22</td>
<td>0</td>
<td>0</td>
<td>24</td>
</tr>
<tr class="even">
<td>Ending Stocks</td>
<td>3</td>
<td>3</td>
<td>5</td>
<td>2</td>
<td>2</td>
<td>5</td>
<td>0</td>
<td>0</td>
<td>4</td>
</tr>
<tr class="odd">
<td>Total Distribution</td>
<td>18</td>
<td>18</td>
<td>22</td>
<td>19</td>
<td>19</td>
<td>27</td>
<td>0</td>
<td>0</td>
<td>28</td>
</tr>
<tr class="even">
<td>CY Imp. from U.S.</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>2</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td>CY. Exp. to U.S.</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
</tbody>
</table>

+---------------------+--------------+-----------------+--------------+
| ##                  |              |                 |              |
| Import Trade Matrix |              |                 |              |
+---------------------+--------------+-----------------+--------------+
| Country             | Chile        |                 |              |
+---------------------+--------------+-----------------+--------------+
| Commodity           | Dairy, Milk, |                 |              |
|                     | Nonfat Dry   |                 |              |
+---------------------+--------------+-----------------+--------------+
| Time Period         | Jan-Dec      | Units:          | M.T.         |
+---------------------+--------------+-----------------+--------------+
| Imports for:        | 2005         |                 | 2006         |
+---------------------+--------------+-----------------+--------------+
| U.S.                | 0            | U.S.            | 1110         |
+---------------------+--------------+-----------------+--------------+
| Others              |              | Others          |              |
+---------------------+--------------+-----------------+--------------+
| Uruguay             | 3076         | Argentina       | 2647         |
+---------------------+--------------+-----------------+--------------+
| Argentina           | 2256         | Uruguay         | 1307         |
+---------------------+--------------+-----------------+--------------+
| Brazil              | 1096         | Brazil          | 234          |
+---------------------+--------------+-----------------+--------------+
| Canada              | 100          | Canada          | 176          |
+---------------------+--------------+-----------------+--------------+
|                     |              |                 |              |
+---------------------+--------------+-----------------+--------------+
| Total for Others    | 6528         |                 | 4364         |
+---------------------+--------------+-----------------+--------------+
| Others not Listed   | 0            |                 | 0            |
+---------------------+--------------+-----------------+--------------+
| Grand Total         | 6528         |                 | 5474         |
+---------------------+--------------+-----------------+--------------+
|                     |              |                 |              |
+---------------------+--------------+-----------------+--------------+
| Note: Year 2006     |              |                 |              |
| data are for        |              |                 |              |
| January through     |              |                 |              |
| August only         |              |                 |              |
+---------------------+--------------+-----------------+--------------+

+---------------------+--------------+------------------+--------------+
| ##                  |              |                  |              |
| Export Trade Matrix |              |                  |              |
+---------------------+--------------+------------------+--------------+
| Country             | Chile        |                  |              |
+---------------------+--------------+------------------+--------------+
| Commodity           | Dairy, Milk, |                  |              |
|                     | Nonfat Dry   |                  |              |
+---------------------+--------------+------------------+--------------+
| Time Period         | Jan-Dec      | Units:           | M.T.         |
+---------------------+--------------+------------------+--------------+
| Exports for:        | 2005         |                  | 2006         |
+---------------------+--------------+------------------+--------------+
| U.S.                | 0            | U.S.             | 0            |
+---------------------+--------------+------------------+--------------+
| Others              |              | Others           |              |
+---------------------+--------------+------------------+--------------+
| El Salvador         | 198          | El Salvador      | 80           |
+---------------------+--------------+------------------+--------------+
| Panama              | 75           | Panama           | 49           |
+---------------------+--------------+------------------+--------------+
| Bolivia             | 21           | Ecuador          | 36           |
+---------------------+--------------+------------------+--------------+
| Honduras            | 12           | Honduras         | 12           |
+---------------------+--------------+------------------+--------------+
|                     |              | Bolivia          | 7            |
+---------------------+--------------+------------------+--------------+
|                     |              |                  |              |
+---------------------+--------------+------------------+--------------+
| Total for Others    | 306          |                  | 184          |
+---------------------+--------------+------------------+--------------+
| Others not Listed   | 0            |                  |              |
+---------------------+--------------+------------------+--------------+
| Grand Total         | 306          |                  | 184          |
+---------------------+--------------+------------------+--------------+
|                     |              |                  |              |
+---------------------+--------------+------------------+--------------+
| Note: Year 2006     |              |                  |              |
| data are for        |              |                  |              |
| January through     |              |                  |              |
| August only         |              |                  |              |
+---------------------+--------------+------------------+--------------+