U.S. dairy exports reached record levels in 2008, but that accomplishment was tempered by volume and price declines that began at mid-year and accelerated in the fourth quarter.

Dairy export sales totaled $3.82 billion last year, up 25 percent from 2007 and twice the amount sold in 2006. 2008 marked the sixth straight year of export growth.

Exports were equivalent to 2.545 billion pounds of milk solids (total-solids base), 16 percent higher than in 2007, according to an analysis of trade data conducted by the U.S. Dairy Export Council (USDEC). The export volume represented 10.8 percent of U.S. milk production in 2008.

“U.S. exporters enjoyed a remarkable two-year run, from the middle of 2006 to the middle of 2008, when they were able to capitalize on a serious imbalance in global supplies,” says Tom Suber, USDEC president. Conditions were favorable and U.S. suppliers made new strides to meet the growing demand. The result was that the United States became a more significant commercial player in the global market, he adds.

Shipments of nonfat dry milk/skim milk powder, cheese and butterfat were all significantly higher last year. U.S. exporters posted record commercial shipments of milk powder and captured commercials of cheese and butterfat for the first time. For the fourth straight year, no government subsidies were used.

Exports of fluid milk reached a 14-year-high, sales of lactose and blends were flat and shipments of whey proteins were lower.

Global demand began to soften last summer when severe food and fuel inflation cut into consumers’ purchasing power, particularly in the developing world, according to USDEC. Exports were 21 percent lower in the second half of the year than in the first.

A myriad of economic conditions pushed the world dairy market down.

“If this had been a more typical commodity cycle, we would surely have seen some weakening of demand along the lines of what was happening in mid-2008,” says Suber. “But the velocity and magnitude of the economic deterioration pushed the global market down far deeper than anyone expected. Prices are now back to pre-boom levels.”

Given the dramatic shift in the market situation, U.S. dairy exports are expected to be lower in 2009. USDEC’s economic analysis suggests declines in overall volumes ranging from 27 to 40 percent, with a drop-off of 52 to 66 percent in milk powder, 32 to 56 percent in cheese and 36 to 60 percent in butterfat. Less slippage is projected for shipments of whey proteins and lactose.

Source: U.S. Dairy Export Council