Panama's dairy sector seeks competitiveness as 85% of farms remain Grade C

Data from Panama's National Institute of Statistics and Census show declines across several processed-milk categories between January and April 2025 and the same period in 2026. Output of evaporated, condensed and powdered milk fell from 5.85m kg to 3.81m kg, a decrease of 34.9%. Pasteurised milk production dropped by 5.8%, from 26.5m kg to about 25m kg, while natural milk used for related products fell by 12.5% to 39.3m kg.

The Association of Cheese and Dairy Processors of Panama, known as Aproquelpa, says Grade C farms make up about 85% of active dairy holdings. These farms mainly supply businesses producing cheese, yoghurt, ice cream and other dairy products. The association has reported lower milk receipts and a decline in the number of active producers in this segment.

Sector estimates place Panama's annual milk production between 160m and 189m litres, although the sources use different methods. The industry has set a target of returning to roughly 180m litres. It has also identified a gap between domestic supply and market requirements, while noting that production has not consistently regained previous highs.

Emilio Ho Chang, Aproquelpa's president, said Panama could expand its markets and develop additional dairy products, but first needed to strengthen productive capacity. The association has called for participation from farmers, processors, suppliers, traders, universities, consumers and public authorities. Its position is that competitiveness depends on productivity, quality, processing and value-added products as well as tariff protection.

Trade arrangements add to the competitive setting. Panama's Trade Promotion Agreement with the United States took effect in October 2012 and set different tariff-elimination schedules for dairy products. Whole milk powder and cheddar cheese were assigned 16-year schedules, while skimmed milk powder and other cheeses were assigned 17-year schedules. The agreement also included quotas and grace periods. In January 2026, Panama's Ministry of Commerce and Industries activated a special agricultural safeguard for certain cheese imports, including mozzarella, after the threshold specified for the measure was reached.

Producers cited in the report associated part of the contraction with weather episodes linked to El Niño and La Niña, which affected forage, water availability and productivity. The sector has also raised concerns about generational succession and the declining number of active producers. Aproquelpa says the dairy industry can pursue new markets and higher-value cheeses, but the availability of milk from the predominantly small and medium-sized Grade C farms remains central to that effort.