Video footage of calves being violently abused shows appalling behaviour and rules should be strengthened to put a stop to the mistreatment, Federated Farmers says.
Animal welfare group SAFE and Farmwatch set up hidden cameras on 12 Waikato farms and in a slaughterhouse in August.
The footage shows the calves left in crates for up to eight hours, being thrown onto trucks, and one man kicking and bashing them before slitting their throats.
The animal welfare groups say the footage has left the dairy industry's reputation in tatters, and SAFE says consumers should think about boycotting milk products.
Warning: Video contains images of animal cruelty.
SAFE executive director Hans Kriek said each season over two million unwanted calves, referred to as bobby calves, were killed when they were as young as four days old.
"In order for a cow to produce milk, she has to first produce a calf, these calves are often surplus to requirements by the industry, so they are removed from their mothers quickly after birth and many of these calves are taken to the slaughter house.
"They're being kicked, they're being thrown, and the footage that people are upset about was only a fraction and it didn't show the worst."
Mr Kriek said he had made a complaint to the Ministry for Primary Industries.
Federated Farmers dairy section chair Andrew Hoggard said it was appalling behaviour from a minority of people who worked in the industry and it would not be tolerated.
"I was pretty disgusted by the footage," Mr Hoggard told Morning Report.
"In terms of on farm, we've got to get our act together around these bobby calf pick ups. They need to be, from the shed, loaded on a loading ramp so these calves aren't left beside the road all day. I thought that was the industry standard. Obviously there are still a few people haven't quite caught up with that."
He said farmers had to work within strict animal welfare rules and the vast majority cared for their stock humanely.
"Most bobby calves are processed by proper meatworks where they have the proper MPI inspection, so a vet will look over every single calf as it's unloaded and if there's signs of neglect or abuse that'll flow back through and the farmer will face investigation.
Actions of meat processors and transport operators seen in the footage were a question for the Ministry for Primary Industries (MPI), he said.
"What we saw with the crate beside the road contravened the animal welfare code, so those examples there should be acted on."
"I don't think these practices are commonplace at all. I think it is an isolated minority."
Mr Hoggard said provisions in Fonterra's milk supply rules on how bobby calves should be kept were not strong enough.
"I think we do need to strengthen that up, so if you do breach your terms of supply Fonterra has the right not to pick your milk up. I think changes need to be made with how we word that [to] make it explicit that this practice will not be condoned."
DairyNZ said it was taking the issue very seriously and was working closely with other industry partners.
MPI deputy director Scott Gallacher said it started an investigation as soon as they received footage in September.
He said the ministry could not comment on the specifics of the investigation as it ma prejudice its outcome.