The Green Party says an international report ranking the world's biggest milk processors is a wake up call for New Zealand's dairy sector.
The report by the International Farm Comparison Network has ranked Fonterra second among the world's 20 biggest dairy processors, for the volume of milk it collects, but near the bottom of the list in terms of the value it adds to that milk.
That is based on the turnover per kilo of milk it processes.
Green Party co-leader and economic spokesperson Russel Norman said it highlights the weakness of the Government's volume-led export strategy.
"Fonterra's argument is that they need the volume in order to then add the value, so unless you're a certain sized player, how can you compete? Obviously there's some truth in that, but they've been saying it for a long time and what this report demonstrates is that they're not really making any significant progress."
However, Fonterra chairman John Wilson said there are other ways of measuring its performance.
"Fonterra's actually about two very much joined at the hip activities. First of all, it's being the most efficient manufacturer, supply chain manager and seller of ingredients products. We live at the bottom of the South Pacific, a long way from our markets, so we need to ensure that we can very effectively and efficiently ship our commodities to the world and that is something to be very proud of in what we manage to do."
Mr Wilson said one of the key figures to look at in measuring Fonterra's performance is what it is paying its farmers.
He said five or six years ago Fonterra farmers were still being paid 30 percent less than their European peers.
"Today Fonterra farmers are paid along side our peers in Europe. I think that speaks volumes for the Fonterra strategy being highly effective for our co-operative owners."