Any change to the Dairy Industry Restructuring Act (Dira) for Fonterra's proposed Trading Among Farmers (Taf) must hinge on supplier-shareholder endorsement, Federated Farmers says.
The rural lobby organisation has conditionally backed changes to Dira and raw milk regulations, while also making suggestions that would "substantially improve them".
In a submission, it said changes relating to Taf, as proposed in the draft Dira, were premature, coming before farmer shareholders had a clear understanding of what the dairy co-operative wished to put in place regarding Taf.
That, in turn, had caused anger among many farmers, with some saying they did not trust the Government to look after the best interests of farmer shareholders in Fonterra.
There appeared to be "too much haste" in getting the proposed Dira changes through into legislation.
Last week, it was reported that Fonterra's board had backed a farmer-trust custodian for its shareholder fund as part of Taf.
In a statement, Federated Farmers dairy chairman Willy Leferink said legislation must not lead Fonterra's capital restructure and its shareholders must be left to determine the process without interference.
Farmer shareholders were the "real stakeholders".
Federated Farmers said the draft raw milk regulations would not drive more competition at the farm gate.
There was no incentive for independent processors (IPs) to collect milk from the farm gate if they collected less than 30 million litres of milk per year.
"In fact, it incentivises IPs to collect less than the threshold just so that they can continue to take this very convenient milk supply, at regulated prices," the submission said.
IPs who had their own supply needed to be weaned off regulated milk, Mr Leferink said.
"It's perverse they'll be allowed to take the full quantity of regulated milk for three seasons, even after new regulations take effect."
IPs with their own supply and formed before June 2008 should have their 50 million-litre allocation ramped down in thirds.
Getting the milk price right was imperative and consumers had a right to see it was set correctly and transparent, he said.
Federated Farmers agreed the milk price manual should be publicly available. It also believed the Commerce Commission should review the manual and also audit the base milk price at the beginning of the season.
