Woolworths has become the first national supermarket chain to dump its $1-a-litre milk range, with farmers saying Coles and Aldi must follow if they want Australian dairies to survive.
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The retailer has caved in to a years-long campaign, announcing its cheap milk line will be off the shelves from Tuesday.
Farmers say milk producers are in peril after years of drought, spiralling production costs, and low profitability after the introduction of $1-a-litre milk eight years ago.
"The situation facing dairy farmers is critical," NSW Farmers Dairy Committee chair Erika Chesworth said on Monday. "This is a lesson for every other retailer in the country."
From Tuesday, Woolworths-branded milk will sell for $1.10 a litre, with the extra 10 cents to go to the 450 dairy farmers that supply the chain.
Last year Woolworths began offering a "Drought Relief Milk" range, at $1.10 a litre, with 10 cents to go to farmers but it also continued to sell it's $1 range. That ends nationally on Tuesday.
"We've heard the outlook will continue to be extremely tough for dairy farmers right across the country," Woolworths Group chief executive Brad Banducci said on Monday.
"This is affecting milk production and farm viability ... It's clear something needs to change."
Federal Agriculture Minister David Littleproud said he hoped the decision was the beginning of the end for Australia's "$1 milk disaster".
"Supermarkets can't pretend selling milk cheap doesn't hurt farmers and they've got to be called out on this rubbish," he said.
The minister said Australia's competition watchdog had found supermarkets used their market power to drive down what they paid processors, and processors used their bargaining power to drive down what they paid to farmers.
"There were around 7500 dairy farmers in 2010 and now there are just under 6000 as the industry has consolidated. There's no point having cheap milk for consumers today if it sends farmers broke."
AAP has sought comment from Coles and Aldi.
In NSW alone, milk production has fallen by 11 per cent over the past year and the NSW Farmers' Association says Coles and Aldi must also act if they want a sustainable diary industry.
Just last week, Nationals MP David Gillespie said supermarket chains, dairy processors and dairy farmer groups should introduce a temporary, 10-cents-a-litre levy for the year ahead.
Australian Associated Press
