A THREE cents a litre increase to Norco's milk suppliers from July 1 is likely to make them the highest paid dairy farmers in the country.
NORCO CEO Brett Kelly said the co-op's second shipment of milk left for China this week and a new contract with Coles kicks in from July.
"The co-op has performed well in recent years... but this (price rise) is coming out of operational profit. Other dairy processors are yet to release their prices and I challenge them to match our performance," he said.
"Times are tough for farmers... we recognised we needed to increase our farm gate price, but the only way to do that was out of operational profit." Ken Bryant is a dairy farmer with 200 cows at Bexhill whose family has been supplying Norco for about 50 years.
He said the three cents increase is "a step in the right direction" but not enough to attract people to the industry.
"To get young people to stay in the industry or to attract new people in it's got to be profitable and even with the three cents, it's still not at that level," he said.
Mr Bryant said the introduction of $1 a litre price promotions in the major supermarkets had put a ceiling on prices paid to farmers and over the past few years the farm gate price had been going down slowly while the input costs kept going up dramatically.
"Costs have gone through the roof; electricity, insurance. This year grain prices have gone up massively because of the drought out west, so this pay rise just keeps us in business."
Mr Bryant said the three cent increase would be "the first decent pay rise (they've) had in three or four years" and he's hoping there's more to follow.
Brett Kelly is confident the opening of a market in China could be the next big growth area.
"If we can develop that in the next year or two and get substantial volumes at good prices then profitability goes up and we can pay more to farmers so they can invest in their farms," he said.