Woolworths says its ongoing milk price war with rival supermarket Coles is unsustainable and will inevitably hurt Australian dairy farmers.

Executives from Woolworths and Coles have held talks with the National Farmers Federation about the potential impact of the price reductions on dairy farmers.

Coles recently slashed its milk prices to just $1 per litre and Woolworths community relations manager Simon Berger says the supermarket has been forced to cut its prices to compete.

"That's the nature of a competitive industry," he said.

"But we are very forthright in saying that this is not a price war we would have started ... and it's a price war we do have some concerns about.

"We do prefer to work with farmers, rather than against them."

Mr Berger says a good relationship with farmers is essential to delivering quality produce, and says Woolworths is siding with farmers on the issue.

"We told them that we share some of their concerns about this particular price war," he said.

"Coming after the floods, which have devastated the dairy industry after a decade of drought, also gives them very real concerns about the future viability of the dairy industry."