Federated Farmers is urging Fonterra's farmer shareholders to tighten restrictions on outside investment in the co-operative, after the Government refused to do so in new legislation passed this week.
The Dairy Industry Restructuring Amendment Bill paves the way for Fonterra to introduce its Trading Among Farmers plan, so farmer shareholders can buy and sell shares with each other.
It will also set up a fund so farmers can sell the dividend rights of shares to outside investors.
Federated Farmers has criticised the Government for not putting legislative controls on the size of that fund.
The proposal to allow outside investment through the fund has been a bone of contention for many farmers who are worried it could lead to them losing control of Fonterra.
Federated Farmers dairy chairperson Willy Leferink says it is disappointed that the Government would not support an opposition amendment to place statutory limits on the size of the fund, the number of units any farmer can place in it and the number of dividends an investor can hold.
He says without that statutory backing, it's essential that farmers support the move by Fonterra itself to reduce the size of the shareholders' fund.
It has proposed a constitutional change to lower the cap on the size of the fund from 25 to 20% of total shares.
That didn't get the 75% support it needed when farmers voted for the TAF plan last month, and it will go back to Fonterra's AGM for another vote in November.
Mr Leferink says if farmers fail to support the measure second time round, it could leave Fonterra vulnerable to be opened up like a can of sardines.
Meanwhile a farmer opponent of the Trading Among Farmers plan, Lachlan McKenzie, has also condemned the Government's refusal to put statutory limits on the size of the shareholders fund.
He says it shows that the Government is determined that Fonterra will be weakened and demutualised.
Mr McKenzie says the Government's focus is on listing Fonterra on the stock exchange, but this will not generate any foreign currency for New Zealand.
He says the anti-TAF farmer group that he's part of is focusing its efforts now on seeing that the constitutional restriction on the shareholders' fund goes through.
