You’re not imagining it – there is a current butter shortage taking place across Australia, due to an ongoing decline in local milk production.

According to research released by Rabobank, onshore milk production is set to continue to fall as ongoing feed shortages and a smaller milking herd in drought-affected areas continues to impact the industry. This is happening in conjunction with a surge in the industry overseas, resulting in an increase in imported products.

Speaking with ABC News, Rabobank dairy analyst Michael Harvey said the Australian dairy industry has contracted significantly over a long period of time.

“…which just simply means there’s less milk production in the industry,” he said.

“Less milk supply means more imports because we have got a domestic market that is still growing, so you do need more milk, and then it’s about where you source that product from.”

Mr Harvey said imported dairy was increasing steadily, mainly with manufactured products like cheese, whey and milk powders.

“We import quite a lot of cheese, we import… whey and milk powders and things like that, and more recently, increasingly more and more volume of butter,” he said.

According to Dairy Australia’s Situation and Outlook year-end 2025 report it’s expected the adverse weather conditions and higher production costs will continue to affect the 2025/26 season. Despite improved weather conditions in some dairy regions and feed costs have eased, better than expected weather conditions are required to alleviate cost pressures entirely.

Dairy Australia has forecasted a drop of up to 2 per cent in national milk production in the upcoming season.