During the last decade there has been increasing concern in Colombia with respect to the inability of the dairy production industry to respond in the short run to the internal demand for milk, with greater volumes and improved quality of the product. This situation has become evident by the low level of consumption of milk estimated to be 73.4 liter of milk/person/year by the National Institute of Welfare, far below the normal requirement estimated to be 143 liter/person/year. This situation seems to be aggravated by the trend in the population growth in already populated consumption centers, the low purchasing power of the low income groups, and the slow increment in milk production. However, and in spite of, the governments effort to close the gap between supply and demand through different types of price policies, supply lags behind the increasing demand and has forced the government of Colombia to import powdered milk to satisfy the internal demand, especially in the urban areas. In Colombia most of the milk is produced by specialized enterprises, mainly located in cold areas of the country and close to the consumption centers. These areas of production are the ones where productivity gains can be made to meet the increasing demand. However, this potential can be diminished due to low market incentives, inadequate government policies, or other reasons that need to be investigated. These reasons and the present government policies to reach deprived target groups indicate the need to undertake a comprehensive analysis of the production and first handler of milk, in the areas of Boyaca and Cundinamarca, which explains the reason for the low level of performances of the production part of the dairy subsector. It is important, however, to indicate that an increase in supply occurs at the end of the year due to the effect of the rainy season. However, a decrease in demand evolves by the same period due to the school vacation period. This trend in demand and supply leads to a milk surplus with lower prices during the same period.