“It’s great news for us,” Mr Miller said.

“It guarantees 10 cents a litre will go back to farmers and that means the farm gate price will rise by 10 cents a litre.” The increase in the farm gate price will apply to producers in contracts with Parmalat, which supplies Woolworths. 

Mr Miller said the Woolworths decision would, on a year round average, take the farm gate price to 60 cents a litre. 

“There’s light at the end of the tunnel, a sense of optimism we haven’t had for many years. What we now need is for Aldi and Coles to follow suit.”

Mr Miller said dairy farmers had met with Woolworths executives last week to put their case for a stop to the milk discounting war that has caused so much grief for dairy farmers since it was launched in 2011.

The Stony Hill farmer helped bring to national attention the plight of dairy farmers through the drought last year, when he launched a campaign, aimed at Coles, to end the milk discounting war. He said dairy farmers were already pleased with Woolworths’ support for them after the supermarket giant extended the drought levy to June 30 after Coles ended its version in December. 

“This will make a huge difference for half the dairy farmers in the Shoalhaven. With the price of feed through the drought we were that close to being broken.”

While welcoming the Woolworths decision federal Agriculture Minister David Littleproud said more needed to be done. “Whilst I wish Woolworths was taking a much bigger step, they’re miles head of their competitors and its sad it has taken National Party pressure to get to this point.

“Coles and Aldi continue to sell milk at $1. This drives down prices to farmers. Supermarkets can’t pretend selling milk cheap doesn’t hurt farmers and they’ve got to be called out on this rubbish.”

Mr Miller also praised Milton IGA for its support since September, when it declared an increase of 19 cents per unit on its two-litre Perfection milk.