Angry dairy farmers had been "run over by corporate greed" and treated like "medieval serfs", about 400 farmers were told during a rally in Melbourne's CBD.

As a crowd of farmers, animal liberationists and even a United Patriot representative gathered outside Parliament House, one speaker described the country's two major milk processors, Murray Goulburn and Fonterra, as "big bastards" for slashing milk payments to farmers.

The speaker, known as "farmer John", called on the government to regulate milk prices.

"The big bastards up there at Murray Goulburn and Fonterra, you've got to keep them honest," he told the crowd.

Hundreds of people led by a tractor, horse-drawn carts, men on horseback and a dairy cow walked from Federation Square to Parliament House to protest against the cuts. They waved banners with slogans like "Udder Bullshit", "The Bucket Stops Here" and "Milk Cows Not Farmers".

As they walked along Swanston Walk some shouted: "You want a latte? You need a farmer."

But the rally also became a clash of ideologies as farmers faced off against animal liberationists on the steps of Parliament House.

The animal liberationists brought three dead calves with them, which they said they had got from an abattoir. The animals were killed at about four or five days old, the president of Animal Liberation Victoria, Noah Hannibal, said.

They held banners promoting a site, cowtruth.com, pointing to a list called "17 shocking facts about dairy". They were protesting against the dairy industry itself as a form of animal cruelty and exploitation.

The farmers condemned them for bringing dead calves to the rally.

While the farmers made it clear they were unwelcome, South Australian Senator Nick Xenophon got a rousing reception when he said the treatment of dairy farmers was "a disgrace".

"It should never have come to this," he said.

And he blasted the nation's two biggest supermarkets for their role in the milk price wars over recent years.

He said dairy farmers had become "collateral damage"  in the milk price war, "using your product as a virtual loss leader".

"We need a plan that actually makes sense, a long-term 10 year plan so that you know that you've got a future. You just want you to be paid fairly for your endeavours. Right now a lot of you are like medieval serfs, just living hand-to-mouth because you have no rights," he said.

To make the rally more contentious, Blair Cottrell, the leader of anti-Islam group the United Patriots Front, was spotted among the crowd with his own flag, marching in support of the farmers.

But when he started to speak farmers shouted him down.

"Get off," one farmer yelled, before adding: "You're nothing to do with this."

Victorian Senator John Madigan said dairy farmers "had been totally run over by corporate greed".

"It's an absolute disgrace that our farmers and their wives have to choose between feeding the cows and feeding their families," he said.