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            Though U.S. dairy export sales slowed considerably in the fourth quarter of 2008, total sales for the year were still up 25% over 2007 and double sales of 2006.

            U.S. dairy exports totaled $2.82 billion in 2008, accounting for 10.8% of U.S. milk production. Imports also climbed 9% to $3.32 billion. The result: A dairy trade surplus of some $504 million.

            “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, U.S. Dairy Export Council president.

            Exports represented 46% of powder produced in the U.S. last year, 48% of whey proteins, 55% of lactose, 12% of butter and 3% of cheese.

            Trade conditions deteriorated starting last summer, however, when severe food and fuel inflation cut into consumers’ purchasing power, particularly in the developing world, says Suber. Dairy exports were 21% less in the second half of the year compared to the first six months.

            “The velocity and magnitude of the economic deterioration pushed the global market down far deeper than anyone expected,” says Suber. “Prices are now back to pre-boom levels.”

            USDEC expects export volumes to decline 27% to 40% this year, with a drop-off of 52% to 66% in milk powder, 32% to 56% in cheese, and 36% to 60% in butterfat. The fact that the European Union is now providing export subsidies for its overseas sales won’t help.

            “We expect 2009 to be a challenging year for U.S. exporters, but global dairy analysts are virtually united that long-term demand factors and strong markets will return,” Suber says.