Aussie supermarkets told to raise milk prices or face government intervention

Australian supermarkets have been warned to stop selling "dollar-per-liter" fresh milk or face government controls, following a widespread public backlash over "unfair" price war putting farmers out of business.

Federal Agriculture Minister Barnaby Joyce has told News Corp a re-elected coalition government would force a price rise so producers could get a "fairer deal" after it was revealed many dairy farmers were hundreds of thousands of dollars in debt as a result of a supermarket milk price war.

"Retailers need to understand the momentum is there nationally for farmers to get a fairer deal, dollar-liter milk that is cheaper than bottled water is not fair," Joyce told News Corp on Thursday.

"It is seen now by consumers as a bad thing that rips off farmers; it is affecting (the supermarkets') good corporate names, so they should change it."

"Retailers don't want the government to jump on them, but we will if they don't do anything."

Joyce's latest comments were supported by independent Senator Nick Xenophon, who said it was a "national disgrace" that milk could be sold for one (Australian) dollar (73 U.S cents) per liter.

"It should never have come to this; dollar-a-liter milk price is not sustainable," he said on Wednesday afternoon.

"If we have to have an emergency levy put on milk, so be it."

The news follows Wednesday's announcement from the government that a half a billion dollar dairy bailout package for struggling farmers would be distributed among the nation's 6,000 dairy producers.

The bailout package was deemed necessary after the nation's two diary giants Fonterra and Murray Goulburn slashed wholesale prices to sustain the supermarket price war. In turn, the wholesale price cut was passed down to farmers, some of whom lost the equivalent of a yearly profit in one day. Endit