After sharply increasing (2007), dramatically falling (2008) and quickly rebounding (2009), international dairy prices remained at relatively high but stable levels over much of 2010. Toward the end of the year and early 2011, global prices strengthened rapidly but stayed well below the peak levels of 2007/08 with the exception of record high butter prices (Oceania). Much of the strength in the dairy markets could have been attributed to a combination of strong demand in the Russian Federation and South East Asia, and constrained supplies from Oceania. Imports of milk powders to China have soared, fuelled by rising income but also food safety concerns, in the aftermath of the milk adulteration incidents. Steep increases in grain and energy prices have put upward pressure on feed costs, curtailed supply expansion and have been additional factors underpinning prices. The global dairy sector is entering into a decade of relatively high prices, continuing strong demand for milk and dairy products but also higher production costs and possibly continued market variability. The outlook period starts amid geopolitical turmoil in North Africa and Middle East, the uncertain impact of the earthquake tragedy in Japan, and a global economy adjusting to higher energy costs.