MAJOR supermarkets have been forced to respond to rising supply costs among dairy farmers, increasing the price of homebrand milk products by as much as 60 cents.

Both Coles and Woolworths announced significant price increases for their branded milk lines late last week, with 1L cartons increasing by 25c to $1.60, while 3L bottles rose in price from $3.90 to $4.50.

Whorouly South dairy farmer Jono Pethybridge said the price increase "had to happen" amid a dwindling milk pool as established farmers continue to exit the supply chain.

"It's supply and demand – there's just not enough milk," he said.

"Our milk pool used to be a lot of milk export, now we are a lot more domestic – there's less milk around so it's going to stay home.

"Supermarkets had to act – our milk goes north up to Sydney and they've got issues with floods and rainfall.

"Victoria is the main supplier for Australia – these companies are having to drive a bit further to get the milk so they're having to pay a bit more as well."

Victorian Farmers Federation (VFF) United Dairyfarmers of Victoria vice–president Mark Billing said the price increase by supermarkets would play an important role in placing value back into the supply chain going forward.

"We've got fertiliser costs that have gone through the roof and significant costs around energy and grain that farmers need to feed to our cows," he said.

"Farmers can't continue to fully absorb these costs and that's part of the reason we're now seeing retail level prices start to increase.

"Many dairy producers are just breaking even in terms of mounting costs.

"To have milk, we need dairyfarmers, and this move helps ensure that.

"The retail price of milk has remained stagnant for many years now, so from a farming point of view this change has been a long time coming."

Mr Pethybridge said young people had largely been priced out of buying dairy farming land, while established farmers had felt the pinch and increasingly exited the industry during the pandemic.

However, he said he expected those who remained in the industry to benefit from a 'perfect storm' amid the dwindling milk pool, with prices expected to remain high over the coming years.

"Things are pretty positive – pricing is at a level where it should be," he said.

"I think we're in for a few really good years with pricing.

"We can control our internal factors and ignore external factors – things like milk price and weather you can't control.

"Things aren't always going to be good, that's just the way of farming."