Farmers did not create Fonterra "to kill it off by a thousand competitive cuts", Federated Farmers dairy chairman Willy Leferink said, referring to the Ministry of Agriculture and Forestry's latest discussion document which lays out proposed changes involving the Dairy Industry Restructuring Act (DIRA) and the raw milk regulations.
The proposed changes to the raw milk regulations have already been attacked by Fonterra chairman Sir Henry van der Heyden, who said profits would head overseas and it would hinder rather than help New Zealanders get access to affordable milk.
That has been rejected by Prime Minister John Key, who, speaking on TV3's Firstline programme yesterday morning, took steps to assure the company and its shareholders the moves were beneficial to all involved.
"It's very important that we have transparency, because Fonterra find themselves primarily in the monopoly position, they control about 95% of all milk production in New Zealand, it's actually in Fonterra's interests that there is competition in that marketplace," he said.
Mr Leferink said the ministry had been "grappling" with the regulations for a number of years, especially given the recent surge in the number of independent processors, all of whom seemed to want their 50 million litres of regulated raw milk from Fonterra.
"Because there is a regulatory cap on the total volume of milk available, the milk pail is starting to empty. That said, Government still seems keen to provide new start-ups with enough milk to start production rolling."
If the Government wanted new export entrants, then it needed to "turn off the tap" to those receiving milk at the regulated price.
Farmers would be angry if there was no incentive on independent processors to build their own milk supply, or to make commercial arrangements to secure milk. Changes to the DIRA must be about creating real competitive tension for farmers' milk, he said.
Labour's primary production spokesman Damien O'Connor described it as a "kick in the guts" for Fonterra farmers who had remained loyal.
"Fonterra says this decision will mean subsidies continue for competing companies at a time when Fonterra itself is being asked to reduce the cost of milk to New Zealand milk consumers.
"They can't afford to do both, and this decision will put more upward pressure on the price of milk in our shops."
The price of milk has been a recent hot topic, with criticism that it was becoming unaffordable for many families.
Mr O'Connor was also concerned the timing coincided with the last opportunity for Fonterra farmers to scrutinise the latest proposals for Trading Among Farmers.
Earlier this week, Sir Henry said New Zealanders would be subsidising increasingly foreign-owned dairy processors, if the proposed changes were introduced.
Companies with foreign shareholdings include Russian-owned New Zealand Dairies; Synlait Milk, which is majority-owned by Bright Dairy of China; Miraka Ltd - a new entrant to the dairy processing industry whose "strategic partners and investors" include Vietnamese milk and dairy products manufacturer Vinamilk; and Open Country Dairy Ltd, which has a Singapore-based shareholder.