Consumption of dairy products in China fell by up to 50% in September following the melamine milk contamination scare and could take years to fully recover, according to Rabobank.
Exports of Chinese dairy products, while accounting for a small share of total production, reportedly dried up as consumers were scared off China-made products and governments banned that country's imports.
The Rabobank report said several Chinese dairy companies closed and farmers saw demand for their milk disappear.
But by early October consumer panic had dissipated, tainted products had been recalled and testing had confirmed products still on the market were melamine-free.
The Chinese Government had also introduced steps to improve the performance, operation and regulation and confidence in the supply chain.
"Reports suggested some improvement in sales in most product lines," Rabobank said.
It would take some time to rebuild consumer confidence in the safety of Chinese dairy products.
"Rabobank's initial assessment is that a recovery of demand to pre-crisis levels is expected to take at least 12 months, with the rate of growth thereafter likely to remain below pre-crisis levels for several years to come."
While the international impact has been small because of the low volume of milk product exported by China, Rabobank does expect global demand to fall as a result of lower Chinese demand.
There was also a chance low consumer confidence in China could spread to neighbouring countries but demand for imported dairy products could rise as consumers and manufacturers switched to "safer" products.
The crisis could push up prices of internationally traded dairy commodities, the bank report said.