There are fears some of our favourite baked goods could face a price hike as a national butter shortage puts pressure on Australian food producers.

The global price of butter has increased by around 60 per cent over the past 12 months, putting pressure on business owners like patissier Peter Pattison.

"Three years ago we were paying about $80 for a 25 kilogram block of butter, then about 18 months ago it hit around $120 a box and at the moment there's talk of $300 a box," Mr Pattison said.

"There's fear of no butter in the industry at the moment so we're testing other products that can be substitutes which is something we never thought we'd need to do."

Mr Pattison said while he was currently absorbing the extra cost, prices for his products might need to rise if the shortage continued.

"I would hope that people understand, consumers don't want to see any price increase so you have to find a balance."

Growing demand pushing prices up

The rise in price has been partly driven by increasing demand as consumers move away from spreads like margarine.

Dairy Australia analyst John Droppert said a growing appetite for full cream milk over skim was also a factor.

"This massive shift from skim milk back to whole milk has the kind of side effect of taking a whole lot of milk fat out of the supply for butter and putting that back into the milk carton," he said.

"Traditionally a lot of the fat that's removed from that skim milk is actually the majority of what gets turned into butter.

"So when you're selling that litre of milk with the fat still in it, there's a lot less fat obviously to manufacture into butter."

Pattison's Patisserie owner Peter Pattison said there is talk a 25kg of butter could cost $300. ( Supplied )

Butter makers benefiting from the boom

The price spike is positive news for butter producers like Sydney's Pepe Saya.

Melissa Altman and her husband started the business in 2010, supplying restaurants and specialty grocers with products such as table butter, butter milk and ghee.

"We've found business has been growing quite rapidly within the last few years," Ms Altman said.

"I think a lot of people grew up on butter and then they moved over to margarine but a lot are now coming back to butter so it's had that full 360 degree effect," she said.

Ms Altman said while the butter boom was good for business, the price of cream was also rising.

"Obviously it's the main ingredient in our product, for every litre of cream we get half back in butter fat and the rest is used for butter milk," she said.

"We've seen cream prices increasing by 20 per cent. We've actually just locked in cream with our suppliers so we've been guaranteed for now hopefully."

Butter shortage a global problem

Some food suppliers have been struggling to source enough butter from Australia and overseas to meet the growing demand.

In Europe, there are warnings of a major butter shortage in the lead up to Christmas when consumption in the northern hemisphere usually peaks.

Sydney food distributor Andrew Kirk imports special pastry butter from Belgium and said orders weren't slowing despite the higher prices.

"I've never seen it in the 30 years that we've been doing business and the thing about it is there's more to come," he said.

"Hopefully these price increases are filtering down to farm level and these long suffering dairy farmers can actually make a dollar again."

Staff making butter at Pepe Saya in Sydney ( ABC News: Jade Macmillan )

Mixed impact on farmers with shortage expected to ease

While some dairy processors have increased the amount they pay farmers for milk fat, analyst John Droppert said it was partly being offset by lower protein prices.

"When you take the fat out, the protein part of the milk is usually dried into skim milk powder and in Europe at the moment they've got a stockpile of about 400,000 tonnes of that product," he said.

"So while we see record high butter prices we're seeing almost record low protein prices. Put those two together into the litre of milk that a farmer produces and it isn't worth as much as if you were just valuing it on the fat content."

Mr Droppert predicted the local shortage at least would ease within the next few months.

"In Australia we're expecting to see some form of relief through the spring peak in milk production but the bulk of the shortage is probably not going to be alleviated until at least after Christmas," he said.

"So it will be early next year I think before this really starts to lose some of its heat."