Agriculture Minister Barnaby Joyce has hit out at the directors of milk giant Murray Goulburn, declaring their 50 per cent pay rise awarded last year "doesn't pass the sniff test".

After a year of retrospectively slashing the price of milk solids paid to farmers, losing key executives and seeing its share price slide, the co-operative now faces an ACCC inquiry into the dairy industry.

The pay hike, agreed by investors in July last year before the turmoil began, angered farmers when it was revealed in financial statements lodged on Wednesday.

Announcing the ACCC inquiry after a meeting with farmers and industry representatives on Thursday, Mr Joyce said Murray Goulburn was an integral part of the dairy industry and its survival was essential.