Fonterra chief executive Andrew Ferrier says the dairy giant has "reservations" about the Government's move to force it to send more raw milk to rival processors at cost price.
"We are concerned that Fonterra's competitors, who have access to their own supply, are taking advantage of the situationto acquire cheap milk to compete against us internationally," said Mr Ferrier.
"We are of the firm opinion these competitors should not have guaranteed access to Fonterra's milk supply in the long term."
Fonterra is required by law to supply rival companies with 40 million litres of milk - about 2.7 per cent of its milk supply - at cost price each season, but this season will have to kick in an extra 100m litres. The regulations do not say what should happen when demand exceeds the 400m litre threshold - but this season's 400m litres is expected to run out next February.
NZ Dairy Foods, a major rival without its own farmers, gets 250m litres, and Open Country Cheese and the Tatua co-operative each take 50m litres, with a further 50m litres split between small companies.
Agriculture Minister Jim Anderton said for the 2007-2008 season, Fonterra would be required to supply up to 500m litres of raw milk at the regulated price, and that next year, for the 2008-2009 season, this volume would rise again to 600m litres.
