Coles and the Victorian farm lobby have struck a deal to create a new brand of milk aimed at returning money to farmers.

The “Farmers Fund” brand of milk will hit the shelves at some Coles supermarkets later this week with 40 cents from every two-litre bottle returned to farmers via a fund distributed by the Victorian Farmers Federation.

But VFF president David Jochinke stopped short of telling his members to buy the milk.

“We’re encouraging anyone who is buying home-brand milk to consider investing in this fund,” he said.

“We think supporting branded milk is a good thing but for people buying home-brand milk this is an opportunity to get them involved.”

Coles will continue to sell its discount dollar-a-litre milk, with the new product aimed at people who want to support the dairy industry directly.

It is anticipated $1.5 million will be raised by the Farmers Fund milk in the first year.

Coles and the VFF

The VFF is cautious for appearing too close to Coles, having being criticised for previous relationships.

Coles regularly sponsors major VFF events, including the Heart of Victoria dinner and its annual conference.

Farmers, including the VFF’s membership, have often questioned the relationship given the supermarket was responsible for introducing dollar a litre milk into Australia.

But Mr Jochinke rejected suggestions the farm lobby was getting too close to what some farmers consider as their enemy.

“We’ve framed it as this is a relationship, not a friendship,” he said.

Coles has already contributed $1 million to the fund so money can be distributed immediately.

Farmers from south eastern Australia can apply for $20,000 for on-farm work including upgrades, consultants or plans to increase productivity.

The first round of applications closes on September 30.

The fund is similar to a 2012 initiative in South Australia where the dairy industry launched a milk brand and collected 20 cents a litre for farmers.

The milk was sold exclusively through Coles in the first 12 months.