Rabobank has published a new report looking at the global dairy industry in Q3 2012, particularly examining supply, demand and pricing developments in key markets around the world.

In the report, authored by the bank’s Food & Agribusiness Research and Advisory (FAR) group, Rabobank says that the global dairy market appears headed for a period of renewed supply scarcity in the next year. The impetus for that tightening market comes largely from the supply side, where low milk prices, extreme feed costs, and unfavorable weather are expected to slow production growth in export regions to a trickle.

Rabobank forecasts a reduction in the exportable surplus available from the “Big Seven” export regions (the EU, U.S., Australia, New Zealand, Brazil, Argentina, and Uruguay) in the closing months of 2012 and first half of 2013 – the first such reductions in more than four years.

On the demand side, Rabobank says that some anticipated improvement in the economic position of consumers should provide an impetus to improved demand for dairy. However, the story will be far more compelling in developing regions than the West, where employment and income growth are expected to remain at modest levels.

Click here for the full report.