Woolworths will extend its 10-cent dairy levy until mid-next year as dairy industry's mandatory code of conduct comes into full force.
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The supermarket's own brand two and three litre fresh milk will continue to contribute to farmers until June 2021.
The levy is expected to give $30 million to producers on top of the $50 million it has raised since 2018.
Woolworths fresh food director Paul Harker said the levy provided much-needed relief to farmers.
"While conditions have improved and farmgate prices have gone up since we started the levy in 2018, we're extending payments to provide certainty while dairy farmers and processors find their feet under the new mandatory code," he said.
Dairy processors will have to publish agreements with farmers setting out minimum milk prices under the industry's new code from Monday
The deals will have to specify quality and quantity requirements and in most cases the supply period of the contract.
Price reductions will be banned except for extraordinary circumstances like a trade shock or unexpected tariffs in export markets.
The agreements will also establish the services processors have to deliver and their cost.
A dispute resolution procedure must also be agreed on, including an internal complaints mechanism and mediation.
The mandatory code of conduct is designed to help farmers receive fairer milk prices.
Major processors that break the code face $63,000 fines for every breach, while small businesses can cop fines of $21,000.
Woolworths will also establish a $5 million fund to provide grants to dairy farmers to help improve farm efficiency and profitability over the next three years.
Australian Associated Press
