Woolworths has announced it will stop selling $1-a-litre milk for good, in a move described as a “game changer” by the dairy industry.

The supermarket chain will start charging consumers $1.10 a litre from Tuesday, with the extra money going directly to farmers.

Woolworths Group chief executive Brad Banducci said the corporation believed in the long-term sustainability of the dairy industry.

“In our consultation with industry bodies … we’ve heard the outlook will continue to be extremely tough for dairy farmers,” he said.

“This is affecting milk production and farm viability, which is devastating for farmers and the regional communities in which they live.”

The decision follows an east coast trial of drought relief milk sales, which found 50 per cent of consumers were willing to pay more to help farmers.

Mr Banducci acknowledged the 10 cent increase was less than inflation, but would not rule out a further price rise in the future.

“There’s a fine line between lifting the price and supporting our dairy farmers and also focusing on affordability for our customers, so this felt like the right first, safe step.”

Dairy farmers have been fighting for an end to $1 milk sales since 2011. Photo: AAP

Australian Dairy Farmers Association CEO David Inall called the supermarket’s move was a “game changer”.

“It is reassuring that Woolworths has committed to deliver the full 10 cent increase back to those famers who supplied the milk.”

Dubbo dairy farmer Erika Chesworth said Woolworth’s decision puts dairy farmers over a psychological hurdle.

“We’re hopeful that this is the beginning of us being returned to being completely valued by Australian society,” she said.

“Of course we’d love it to be $2 a litre, but today we’re just really happy that we’re on the path to returning where we belong in society.”

The NSW Farmers Association said it was a big win for dairy farmers, who had been fighting against discount milk since 2011.

It said other retailers should follow Woolworths’ example.

-ABC