THE supermarket price war has claimed its largest chunk of dairy farmer milk cheques yet.

Milk payments for most of Parmalat's Queensland suppliers during May were an average $850 less than the corresponding month last year.

According to farmers, it's the direct result of consumers moving from branded to private-label milk, with a portion of the supplier's milk cheque directly linked to the sale of processor's branded milk.

In late January, major supermarkets Coles, Woolworths and Aldi dropped the price of house-brand milk to $1 a litre, but said it would have no impact on dairy farmers.

According to Queensland Dairyfarmers Organisation president and Parmalat supplier, Brian Tessmann, the portion of branded-milk sales which farmers were rewarded for has dropped to 76.08 per cent, from 83.29 per cent during the corresponding month last year.

He said this represented the pricing system's lowest level since it was introduced in 2000.

The second lowest was for milk sales in February - 77.94 per cent compared to 84.23 per cent the previous year - shortly after the price war began.

"Until we got to February, there was no radical slip (in the percentage). It was generally the same for the month as it was last year," Mr Tessmann said.

"Whereas these (latest figures) are radically different, the drop-off - that change, has happened as of February."

A Coles spokesman said he didn't believe there was any reason for farmgate prices to be reduced as a result of Coles' decision to reduce the price of its private-label milk - especially considering it gave processors a "significant price increase" earlier this year to off-set any switch between branded and house-branded product.

Meanwhile, National Foods has lost the Woolworths private label milk supply contract in NSW to Parmalat.

This means only 72 per cent of NSW Dairy Farmers Milk Co-operative milk - supplied to National Foods- currently has a "secured home".

DFMC chairman Ian Zandstra said he was confident Parmalat would buy the extra milk to fill this contract from DFMC NSW suppliers.

National Foods spokeswoman Julia Fraser said it was in discussions with Parmalat and was hopeful it could "buy back" some of the milk volume for the contract.

Parmalat failed to return calls.