Co-operative dairying is under serious threat in New Zealand, according to Farmers of New Zealand operations director Bill Guest.

He advised anyone doubting companies in private ownership were taking over milk processing to visit Pokeno, where Chinese firm Yashili is setting up a $220 million milk drier capable of producing 52,000 tonnes of infant formula annually.

"Pokeno makes Maungaturoto [dairy factory] look like a dog kennel," Mr Guest said.

"Talley's have consent to build a dairy factory at Moerewa, Wayne Brown is going to build an ice-cream factory at Kerikeri, the purchase of the seven Pinney farms south of Kaikohe for $42 million pending OIO approval - the Chinese are coming to Northland, we can be certain about that."

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Mr Guest, of Te Kopuru, claimed legislation compelling Fonterra to supply milk to prospective competitors opened the way for rivals to get established. "Fonterra started with 96 per cent of suppliers, but is already down to below 86 per cent."

He did not think the National Government was "farmer friendly".

"John Key is business friendly. I don't think he cares about farmers so long as overseas investment funds keep rolling in."

Mr Guest said Fonterra CEO Theo Spierings should slash his $4.18 million annual salary to go with cuts to 1500 co-operative staff announced in the media.

"The wheels are flying off New Zealand dairy farmers' businesses and we need leadership which will bring confidence back into the company."

Fonterra chairman John Wilson and two other Fonterra directors are up for re-election at this year's annual meeting and Mr Guest suggested dairy farmers could send the board a strong message in the poll.

Fonterra Shareholders Council Northern Northland ward representative Terence Brocx, of Okaihau, said the reduction in income from "really good prices" a year ago to today's low returns had been soul destroying for many farmers.

Fonterra could not dictate operation of the world milk market, but was being blamed for the downturn by apathetic farmers who didn't engage with Fonterra. "I'm not prepared to throw away the golden goose. I firmly believe in the co-operative model," he said.

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