It is expected a definite decision will be made by next week, or as early as this weekend.

In an arrangement that has made national headlines, Woolworths last week announced it will trial buying milk directly from a group of dairy farmers in the Manning Valley and create a new brand, called Farmers Own, to be jointly developed by the farmers and Woolworths.

"If there's other avenues for dairy farmers to sell their product rather than just the processors, I think that's fine," Mr Sims said.

"We'll look at [the application] seriously and with an open mind, but most collective bargaining applications get through because we think it's an effective way for people to work," he said.

If successful, it will allow the farmers to bargain collectively, to negotiate a deal with Woolworths that will allow them to trial the supply of milk directly to the retailer.

Currently, most dairy farmers sell their milk to milk processors, who then on-sell it to supermarkets and other retailers.

The proposed deal would see milk sold directly to Woolworths, which will pay to have it processed, instead of farmers selling to processors.

Talks began between the farmers and Woolworths early last year after milk processor Parmalat told the farmers on the mid north coast in January it had signed a new contract with Woolworths and they would have to sell milk for less.

Manning Valley farmer Tim Bale, 54, who heads the collective bargaining group of 54 farmers in the area, told News Limited he wrote to each director of the Woolworths board saying the Parmalat contract was proof $1 milk being sold in supermarkets was harming their trade.

He was contacted by Woolworths general manager Pat McEntee, who offered to talk to the farmers.

"Four of them came up in January last year and we showed them around a couple of farms and I suggested we could supply them milk," Mr Bale said.

"Really, it was more an off-the-cuff comment and he said: 'Well, you could and let's explore that'.

"We think this trial has the potential to provide a much better deal for farmers in the Manning Valley. Our aim is also to secure longer term contracts, which will give us the confidence to invest in our businesses for a sustainable future," he said.

"We will get a higher price for milk, we will sign long-term supply contracts with Woolworths, we will have a say in how our milk is sourced and marketed," Mr Bale said.

He says he believes the benefits will flow to the wider industry.

"We believe if we can get a higher price that'll help lift everybody else's price as well," he said.

The application was lodged with the ACCC on March 22.

Food and beverage company Lion (formerly known as National Foods) and the National dairy farmers lobby group, Australian Dairy Farmers, have expressed their dissatisfaction of the deal.

"The direct arrangement between the retailer and the farmer doesn't address the key issue of selling milk at $1 per litre and it doesn't address some of the resulting issues within the supply chain and ultimately the returns that farmers receive from their milk," Nick Green, Australian Dairy Farmers spokesman, told the ABC.

Mr McEntee said the trial would not be the "silver bullet" that would fix all the problems.

"We think it could herald a new way of delivering better returns to farmers and a more efficient supply chain," he said.

"Over the last couple of years, our customers have expressed their concern about dairy farmers' long term future in this country."

Mr McEntee said he was keen to sign a deal but would not say whether the retailer was willing to meet the price demands of the farmers, who want 50 per cent or more from milk sales.

If it goes ahead, Farmers Own milk is expected to be on the supermarket shelves across New South Wales by the middle of the year.