Milk processors have agreed to develop a code of conduct with dairy farmers aimed at preventing controversial farmgate price cuts.
Farmers were hit hard after Australia's largest dairy producer Murray Goulburn made a sudden and retrospective cut to milk prices in April, and other producers have since lowered their prices for the current financial year.
Peak dairy groups say all industry stakeholders, including Murray Goulburn, have agreed to draft a voluntary code of conduct in what has been hailed as a major milestone for farmers.
The United Dairy Farmers of Victoria (UDV) says the code of conduct will ensure transparency in contracts and pricing decisions.
"It's been a long process to pin down the processors and get them to agree to meet with us," UDV president Adam Jenkins said in a statement.
"But with intervention from the federal government, we've been able to achieve a major step forward for the dairy industry in ensuring farmers are never again forced to retrospectively repay their earnings due to milk price cuts."
Mr Jenkins said stakeholders plan to finalise the draft code before the Australian Competition and Consumer Commission hands down its report into the dairy industry in 2017.
The code will address pricing adjustments and ensure farmers receive all payments accrued over the term of a contract, and ensure that there is no retrospective price cuts, he said.
The agreement comes after national dairy body, Australian Dairy Farmers brought processors, farmers, regulators and government representatives together at a meeting in September.
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