Woolworths has announced it will stop selling $1 per litre milk for good, in a move described as a "game changer" by the dairy industry.

Key points: The price will increase by 10 cents which will go directly to dairy farmers

The price will increase by 10 cents which will go directly to dairy farmers Woolworths would not rule out future price rises to help farmers

Woolworths would not rule out future price rises to help farmers NSW Farmers Association is calling for other retailers to follow suit

The supermarket chain will start charging consumers $1.10 per litre from tomorrow, with the extra money going directly to farmers.

Woolworths Group chief executive Brad Banducci said the corporation believed in the long-term sustainability of the dairy industry.

"In our consultation with industry bodies… we've heard the outlook will continue to be extremely tough for dairy farmers," he said.

"This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live."

The decision follows an east coast trial of drought relief milk sales, which saw 50 per cent of consumers willing to pay more to help farmers.

Mr Banducci acknowledged the 10 cent increase was less than inflation, but would not rule out a further price rise in the future.

"There's a fine line between lifting the price and supporting our dairy farmers and also focusing on affordability for our customers, so this felt like the right first, safe step."

Dairy farmers have long fought the $1 milk for sale in Australia's major supermarkets. ( Supplied: Kim Honan )

Australian Dairy Farmers Association CEO David Inall called the supermarket's move a "game changer".

"It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those farmers who supplied the milk."

Dubbo dairy farmer Erika Chesworth said Woolworth's decision puts dairy farmers over a psychological hurdle.

"We're hopeful that this is the beginning of us being returned to being completely valued by Australian society," she said.

Sorry, this audio has expired Queensland dairy farmers applaud end of $1 litre milk

"Of course we'd love it to be $2 a litre, but today we're just really happy that we're on the path to returning where we belong in society."

The NSW Farmers Association said it was a big win for dairy farmers, who had been fighting against discount milk since 2011.

It said other retailers should follow Woolworths' example.