The Queensland government has been urged to run a marketing campaign to help consumers make better-informed decisions about the milk they buy.
The recommendation was made by a parliamentary committee, chaired by Labor member for Greenslopes Joe Kelly.
The Agriculture and Environment Committee is considering a Katter's Australian Party bill which would establish criteria and legal protection for voluntary "fair milk price" logos to be placed on containers of milk.
The logos would inform consumers where the milk was produced and that the dairy farmer received a certain minimum price for milk.
The bill, introduced by member for Dalrymple Shane Knuth, would also set a minimum price to be paid to Queensland dairy farmers to carry a fair milk price logo, calculated by the government's Dairy Accounting Scheme.
It comes after years of debate over the money paid to dairy farmers amid the supermarket milk price wars at Coles, Woolworths and Aldi.
The committee recommended the KAP bill not be passed.
But it recommended Agriculture Minister Bill Byrne direct his department to investigate options for supporting the Queensland Dairyfarmers' Organisation to run an industry-operated marketing scheme to help people make better-informed decisions about the milk they buy, potentially including fair milk price logos.
The committee also recommended Mr Byrne consult with his counterparts interstate and with federal Agriculture Minister Barnaby Joyce about creating similar schemes in order to increase the sustainability of the Australian dairy industry.
Mr Kelly said dairy farmers in Australia, and particularly Queensland, were labouring under tremendous economic pressures.
But Mr Kelly said the bill created more problems than it sought to resolve.
"The majority of the committee are of the view that significant difficulties would arise were the state government to return to the role of making 'fair' price determinations for milk farm gate prices," Mr Kelly said.
"The role of government ceased with deregulation of the dairy industry back in 2000."
Mr Kelly said the labelling scheme proposed in the bill could also leave the legislation vulnerable to a legal challenge in the High Court on constitutional grounds as it may offend the requirement in the Constitution that trade and commerce between states be absolutely free.
"This is because the scheme seeks to grant a competitive advantage to Queensland producers not available to interstate producers whose milk is supplied here," he said.
"The fact that the proposed labelling scheme is voluntary for Queensland processors does not avoid this."
Mr Kelly said a small number of milk processors were already using labelling and marketing to "better position themselves in the competitive drinking milk market".
"They are creating a marketing advantage on the basis that they offer a quality local product, and treat farmers and livestock well. This includes paying a fair price for their milk," he said.
A similar piece of legislation for the dairy industry, introduced by Mr Knuth, also failed in 2013.
A spokesman for Mr Byrne said the government would consider the report and its recommendations and respond "in due course".
Committee member Robbie Katter said the bill was introduced because "successive governments have done nothing to assist the Queensland dairy industry despite its continued decline since deregulation around the turn of the century".
"It's disappointing that in four years the only thing that has changed in the dairy industry is the amount of dairy farmers which has continued to decline," Mr Katter said in a dissenting report on the report.
"I strongly urge the House to support the bill."