Federated Farmers says the new application by a Chinese company to buy the Crafar family farms will put the Government's revised overseas ownership rules to the test.
The Shanghai-based Pengxin International Group lodged an application with the Overseas Investment Office this week to buy the 16 North Island farms that are in receivership.
Crafar receivers KordaMentha accepted the offer after the Overseas Investment Office and the Government declined an application from Chinese company Natural Dairy.
Pengxin says it plans to increase milk production on the farms, to process into higher value consumer products for China and other Asian markets.
However, Federated Farmers dairy chair Lachlan McKenzie says the acid test will be whether it can benefit the New Zealand economy any more than local owners could do.
He said every farm had received an offer to from a New Zealand farming entity or family.
Mr McKenzie says if Pengxin does buy the Crafar farms, Federated Farmers would like to see it form an export joint venture with an existing dairy co-operative.
The company has said it is not planning to set up its own plants, but will go into partnership with existing processors to make consumer products for export to China, ranging from baby food to cheese and icecream.