Primary Industries Minister David Carter says he's surprised at strong farmer reaction against the Dairy Industry Restructuring Bill.
The bill is set for its first reading in Parliament in the Government's bid to impose greater scrutiny of the process Fonterra uses to set the farmgate milk price.
Legislation would embed Fonterra's milk pricing system in law and require it to be monitored by the Commerce Commission.
It also paves the way for farmers to trade their shares in the cooperative with other members.
The Fonterra Shareholders' Council, which represents its farmer suppliers, is concerned about provisions in the bill covering milk pricing, as well as trading among farmers.
It says the bill would allow government-regulated committees to decide how much farmers will earn and that's not acceptable.
That response has disappointed David Carter, who says there is a necessity for transparency around how Fonterra set the milk price.
"I don't see why Fonterra should be concerned about that," he says. "It's in its interest to price the milk as accurately as possible and I don't believe that Fonterra has anything to fear from what has been proposed in this new legislation".
"Recent comments by Simon Couper, chair of the Fonterra Shareholders Council, were certainly a surprise and a disappointment," Mr Carter says.
Mr Couper says the bill would not achieve Government aims and had hidden provisions that "over time are likely to disintegrate New Zealand's biggest, most successful, and most important export industry".
Mr Carter also defends the share trading provisions in the bill, which he says are necessary. No substantial changes are expected to the Dairy Restructuring Bill when it goes to the Primary Production Select Committee, he says.
