Agriculture Minister Damien O'Connor says he will introduce legislation next year delaying the expiry of provisions that require Fonterra Cooperative Group to accept milk supply from any South Island farmer that seeks to join the company, pending a wider review of the regime.

The bill needs to be passed before May next year when contestability and efficiency provisions expire under the Dairy Industry Restructuring Act as a result of independent processors collecting 22 per cent of all milk solids in 2015, triggering a review of the law.

The holding legislation gives the government time to review DIRA and consult fully with the broader dairy sector.

"The government also intends to undertake a comprehensive review of the DIRA as a matter of priority and will consult fully with the dairy sector on further policy decisions in 2018," O'Connor said in a statement.


"This will allow a more strategic focus to be taken to issues facing the dairy industry, including, for example, environmental issues, land use and how to achieve the best outcomes for farmers, consumers and the New Zealand economy."

The previous administration had planned to relax some of the conditions on Fonterra to accept milk supply from new dairy conversions and would phase out the need to sell regulated raw milk to large rival processors.

Those proposals followed a Commerce Commission review that found Fonterra's market dominance still warranted regulation.

O'Connor said the government considered the commission's findings were still valid, and that the DIRA provisions should stay in place pending a review.

The review of DIRA will take place next year once Cabinet has agreed to terms of reference.