Animal welfare group SAFE has dismissed criticism of a $2 million whistle-blower fund, saying an identical fund in Australia had already changed farmer behaviour.
SAFE is setting up the fund with money from Jan Cameron, founder of the Kathmandu outdoor equipment stores.
It will pay up to $30,000 to farm workers who report sustained cruelty, as well as funding SAFE for education campaigns and legal cases.
Federated Farmers says the fund will do nothing useful, but SAFE's campaigns director, Hans Kriek, says a similar fund launched in Australia in July has already had a good effect.
Mr Kriek says farmers across the Tasman improved their animal welfare practices immediately because they did not want to be dobbed in by workers.
Money for farm workers will be used to compensate those who lose their jobs because they give information.
Among critics of the fund is Agriculture Minister David Carter, who says it will result in more false declarations.
Mr Carter says the fund will give an incentive to people to make false complaints.
He says the Ministry of Agriculture and Forestry might have to be more cautious about information it received from the public before launching investigations.
Federated Farmers' spokesperson Lachlan McKenzie said the fund would not bring out fresh information because farmers already operated in an environment where everybody could see what was going on on their land.
Mr McKenzie said the money would just fatten SAFE's own salaries and result in a few more trespass convictions against activists.
The money would have been better spent on an education trust run by the Society for the Prevention of Cruelty to Animals, he said.