A Queensland dairy farmer is calling for supermarkets to increase the price of milk to $1.50 per litre or he warned the drought will force farmers like him to leave the industry.

Key points: One Queensland dairy farmer says the 10-cents a litre increase for milk is not enough with the price of feed doubling in a year

One Queensland dairy farmer says the 10-cents a litre increase for milk is not enough with the price of feed doubling in a year He says the only way for the industry to survive is for consumers to pay $1.50 a litre for milk at the shops

He says the only way for the industry to survive is for consumers to pay $1.50 a litre for milk at the shops A group of Sunshine Coast hinterland farmers say they're surviving thanks to a direct deal with Woolworths to supply Farmers' Own milk

Major supermarkets Aldi, Woolworths and Coles have recently increased the price of their homebrand milk by 10 cents a litre, putting two litres of milk at $2.39.

That move followed a 10-cent increase earlier this year, which saw an end to $1 a litre milk.

But David Janke, who milks 320 dairy cows each day just outside of Toowoomba in southern Queensland, said it needed to be more.

"Our costs have doubled with this drought … which is what has really hurt the operation," he said.

"Hay this time last year was being delivered at $400 a tonne. This year for the same hay we are paying $750 a tonne.

"Wheaten hay, that 12 months ago we were getting delivered for $300, is now $600 a tonne."

Dairy farmer David Janke says this is the worst drought he has ever seen. ( ABC Rural: Lydia Burton )

Mr Janke said his increased input costs meant he was losing money on his milk.

"We are going backwards very fast," he said.

"It's crunch time — or we won't be here in three months."

Mr Janke believed if the increase was passed on through the supply chain, $1.50 a litre for milk at the supermarket would be enough to support farmers through the drought.

"From $1.10 [a litre] to $1.50 a litre — I think 30 cents should go to the dairy farmers and 10 cents to our processors because they're not making money either," he said.

"And I'm sure consumers are happy to pay and it's not a big increase even if it does go up 40 cents [from $1.10 a litre].

Rural news in your inbox? Subscribe for the national headlines of the day.

"The average household [drinks] about 10 litres [of milk] a week. So that's an extra $4 a week — not even the price of coffee.

"So it's not really going to affect the cost of living. It's just going to give a livelihood to people who are prepared to work hard to supply a top quality product."

One of Queensland's biggest dairies closes

Since deregulation in July 2000, the number of dairy farmers in Queensland has gone from 1,580 to just 324, according to Queensland Dairyfarmers' Organisation (QDO).

Now, Queensland's biggest dairy farm has shut.

McNamee Dairies, which was once Queensland's biggest dairy, has closed due to low milk prices and increased fodder prices. ( ABC Rural: Lydia Burton )

At the peak of their operation McNamee Dairies in southern Queensland was the biggest in the state — milking 2,000 cows a day.

But due to low milk prices David McNamee said he had to make the tough decision to lay-off four permanent staff and mothball his multi-million-dollar dairy.

"It was an economic decision first and foremost … we've lost a hell of a lot of money trying to keep going here because we love it, but we weren't earning enough money out of our milk so we had to close the dairy," he said.

The McNamee family was the target of a large animal activist protest earlier this year, but Mr McNamee said that did not have anything to do with their decision to close.

He explained the family started winding back its operation after dollar-a-litre milk was introduced.

"About five years ago we just started gradually selling cows … we knew the writing was on the wall, that it wasn't going to be economical for us," Mr McNamee said.

"So we made the decision there — the fewer cows we milked, the less money we'd lose.

"But it's been a really hard decision. In the end we had 300 cows left — 300 very good cows — which, when we did sell them, the majority of them went off to other dairy farmers and the remainders went to the meatworks.

"That day [when we sold our last cows] had highs and lows. The highs were 'Thank God we're not going to lose any more money'.

"The lows were finishing up dairying after 10 years here at Lemontree.

"We loved our cows and we're a family that was very proud of what we had and what we did here.

"But just from a pure economic point of view, it was time to go … and a month on [from closing] I think it was the right decision — I can now sleep at night."

Because the dairy was run alongside the family's cattle feedlot, the sheds will now be used as part of that operation.

David McNamee says unless prices increase he doesn't believe there's a future for Queensland dairy farmers. ( ABC Rural: Lydia Burton )

Mr McNamee said milk prices to farmers would have to increase at least 20 cents a litre before his family would consider restarting the dairy.

"I believe 80 cents is a fair price for our milk [at the farmgate]," he said.

Our best stories in your inbox Subscribe to Rural RoundUp: Get our best stories from rural and regional Australia every Friday.

"The way feed prices are, even 80 cents isn't enough because we are carting hay all the way from Victoria, we are carting all our grain from Western Australia."

Mr McNamee said if milk prices did not increase Queensland would lose its dairy industry.

"Every dairy farmer knows they can't survive … the only way to [keep the industry alive] is to increase that farmgate price to 80 cents or more," he said.

"I believe the Queensland industry is on its way out, never to return.

"I believe everyone west of the Great Dividing Range will have to get used to drinking UHT [long life] milk. I really do believe that.

"At the moment they are trucking in about 60 B-Double trucks every week full of fresh milk from New South Wales and Victoria to supply the Queensland fresh milk market."

Supplying supermarkets directly keeps some farmers going

Five years ago Conondale dairy farmer Lucas Kennedy approached Woolworths to bring their Farmer's Own brand to Queensland and signed a direct deal with the supermarket.

Dairy farmers Torie Harrison, Kacey Walker, Tony Green, Lucas Kennedy and Kym Harrison have a direct supply deal with Woolworths. ( ABC Rural: Jennifer Nichols )

"I actually approached them because they started in NSW. They were going there a good year before they came up here so I just kept ringing before they eventually came out, because I could see the whole concept of what they were doing," Mr Kennedy said.

"It was a very good relationship right from the start. They came to me and said 'What is a sustainable milk price?' and I told them and they honoured that.

"They've come in and said 'What do you need to still be here in 10 years' time?' and I guess I just felt that was the best way to go because where we were going we weren't going to survive and I wouldn't be here today."

The sustainable price has allowed Mr Kennedy to invest in his farm.

He has introduced an automatic self-cleaning calf-feeding machine that gives the next generation of his herd access to their allocated amount of milk around the clock, and he upgraded his raised pens to plastic mesh which is easier on their knees. He is also growing silage to feed his cows.

There are only five farmers in Queensland to have a direct relationship with the supermarket, all of which are based on the Sunshine Coast.

Tony Green from Maleny is a fifth-generation dairy farmer whose property has been in the family since 1906 when it was selected.

"It's good to keep it going and keep it in the family and hopefully we can do well out of dairying with this contract and keep going in the future."

Not only is Lucas Kennedy enjoying good milk prices, but he is also one of few farmers in Queensland with green pasture. ( ABC Rural: Jennifer Nichols )

Torie Harrison juggles working on her farm with working for QDO.

"I'm so pleased that Mum did get the contract to supply Farmer's Own because we were thinking about closing the dairy down," Ms Harrison said.

"So it has meant the difference for me staying and working in the dairy industry to possibly not working in the dairy industry at all."

The milk from the five farms is taken to the Parmalat processing plant at Nambour, where it is processed in a special batch, bottled and sold direct through the supermarket chain.

In a statement, Woolworths said the direct relationships offered by its Farmers' Own milk range since 2013 "offers dairy farmers a better deal on milk supply, with above-market rates and longer contracts that provide greater transparency and certainty".

It runs the program in WA's Margaret River, Victoria's Otways region, South Australia's Barossa mid-north region, Manning Valley in NSW, and Queensland's Sunshine Coast hinterland.

When asked whether they would expand the program beyond the five farms in Queensland, a spokesperson said they would "continue to review the opportunities in the future for Farmer's Own growth and would love to see customers continue to support the range".

So perhaps the last word lies with the customer — and whether they are prepared to pay more for milk.