A review of New Zealand's dairy industry is likely to allow Fonterra to refuse to buy milk from dairy farmers, which it has been forced to do up until now.
This emerged after the Government released the terms of reference for a review of the 17-year-old Dairy Industry Restructuring Act 2001 (DIRA.)
Fonterra was given near monopoly status after dairy industry restructuring in 2001. The DIRA was put in place to regulate Fonterra, protecting the long-term interests of farmers, consumers and the wider economy.
Fonterra was required to collect milk from all farmers who chose to sell it.
Minister of Agriculture Damien O'Connor said the review could see Fonterra excused from this requirement.
"If you want to put another thousand cows on your farm, or buy another farm, Fonterra have been obliged to pick up your milk regardless of the impacts of that on the company or the environment,
"They (Fonterra) want to be able to say, 'No, perhaps we don't want the milk because we think the cows are in the wrong place'," he said.
But dairy farmers must not have their livelihoods put at risk by Fonterra, Mr O'Connor said.
"If you're a dairy farmer and they (Fonterra) were to turn around and say we don't want your milk, then you have a huge liability on your hands," he said.
The review will also look at the price of raw milk for farmers, how competitive the milk market is, and incentives to make value-added product.
"The dairy industry will be fully consulted throughout the review so that any issues can be given full consideration before any changes happen," he said.
Damien O'Connor said farmers, dairy processors, consumers and the wider public would be able to take part in the upcoming consultation process.