Agriculture Minister David Littleproud believes a voluntary levy is the best option to support dairy farmers.
He says the time is now for supermarkets and processors to play a greater role in the future of Australia's dairy farmers.
"Dairy farmers have endured drought, fires and now they are dealing with increased uncertainty from the impacts of COVID19," Minister Littleproud said.
"This has come off the back of many years of devaluation of the industry with retailers selling milk for only a dollar per litre.
"During COVID-19 supermarkets have been one of the few industries to prosper so there is an opportunity for them to rebuild trust and ensure more money gets into dairy farmers' pockets.
"I have asked them to each individually consider extending and increasing the amount of the support they provide dairy farmers who faithfully supply products across the full dairy cabinet.
"This would allow the benefits of any supermarkets' levy or support schemes to be distributed evenly to Australian dairy farmers, rather than only to those whose milk happens to end up in private label milk.
"Dairy farmers don't want charity they just want to play on an even playing field."
Mr Littleproud said a voluntary levy was the best option to support dairy farmers as it allowed the market to respond, with consumers making purchasing decisions that benefit farmers.
"It is only fair that retailers play their part in giving farmers a leg up during this difficult time. This is a way of making amends for damage to the industry during the years of $1 milk prices," he said.
"It will ultimately be up to each retailer to determine how much support they are willing to provide to our farmers.
"Processors are also critical to the sustainability of Australia's dairy industry and we will work with them to ensure the Dairy Code of Conduct delivers fairness and transparency.
"The Dairy Code has introduced clear laws about how farmers and processors are to conduct their business relationship.
"But we need to explore further steps to make sure the balance is right, such as pre-contractual arbitration like the sugar industry enjoys and protecting farmers from potential predatory behaviour from the introduction of non-exclusive contracts.
"We would also welcome discussions on the setting up of a formalised price step up mechanism that dairy farmers can initiate based on cost of production data."
