Butter and slimmed milk powder prices were up 20% while cheese remained largely unmoved. The report says it is uncertain whether the shifts in the fundamentals are enough to justify such a price rally but suggested that the recent extended "dry period" in New Zealand may have helped price levels.

While the report noted that the US kept up a steady level of milk supply, supply slowed considerably in the EU (see below).

It added that we are yet to see much improvement in demand in key surplus regions, and that China and Russia are leading the first demand-driven contraction in international trade since the 2009 financial crisis.

In the nearer term, Rabobanks's report considers some loss of pricing entirely possible and says that although things have gotten better, the market is not as tight as pricing appears to reflect.

Predictions for 2015 contained within the report are that supply will continue to slow, lower prices will unlock better consumption growth, and stronger buying elsewhere will help offset the weakness of China and Russia.

Outlook for the EU

According to Bord Bia, the report says the last quarter of 2014 saw a slow in production growth in the EU to only 2%, and January 2015 saw a 1.1% decline in production below previous year’s levels. It said this decline reflected reduced producer margins and efforts to avoid the superlevy.

It addded that exportable surpluses are anticipated to fall for the first half of 2015 before recovering as the year progresses.