WHEN up to half of Australia's drinking milk is sold to supermarkets at a loss, what hope do dairy farmers have of receiving sustainable prices?

That is the question confronting the industry this week following evidence given at a Senate inquiry on Monday that supermarkets are forcing processors to supply them with vast quantities of loss-making milk.

Not only was the inquiry into competition and pricing in the Australian dairy industry told that processors were selling milk at a loss in a desperate bid to hold on to private label contracts, it also heard that in the process, a devastating impact was being wrought on farmers that threatened the future of the entire dairy industry.

Such is the ever-increasing market dominance and unfettered power of Australia's dominant retail chains, Coles and Woolworths, in the 21st century.

Somehow, Australian agriculture has arrived at the point where it is acceptable for farmers and processors to make a loss, as long as the retail chains succeed in their relentless pursuit of profit.

Corporate giants have convinced successive governments that Australia's retail environment is competitive enough to ensure each player along the supply chain makes a living.

The evidence that supermarkets are delivering such healthy profits year after year at the expense of their farmer suppliers is no longer just overwhelming - it's a deafening scream reverberating throughout the country.

Senate inquiries and Australian Competition Consumer Commission investigations have come and gone and still the dramatic imbalance of power between retailer and supplier grows.

It beggars belief that the ACCC can investigate the power of supermarkets and conclude their power remains within acceptable limits.

Just as incomprehensible is the unwillingness of the Federal Government to heed warnings of what supermarket power means for rural communities.

Ideas have been floated on ways to redress the imbalance, such as Independent Senator Nick Xenophon's call to split Coles and Woolworths in two.

It's now well past the hour for the Government to grasp what is at stake - the very future of scores of Australian farmers and their families.