Fonterra is seeking changes to raw milk regulations so it no longer has to sell milk to processors who have their own supply or who are not servicing the local market.
The rules were designed to offset Fonterra's dominance in the domestic dairy market when it was created 10 years ago, by requiring it to sell up to 600 million litres of milk a year to other processors at a regulated price.
The Ministry of Agriculture is reviewing the regulations under the Dairy Industry Restructuring Act (DIRA).
Fonterra supplies milk to about 30 other processors, but says most of the price-regulated milk is going to the six largest independent processors who are also collecting about two billion litres of milk a year from their own suppliers.
Fonterra director John Monaghan, who chairs the co-operative's external relations committee, says those companies are producing dairy products mostly for export, not the local market for which the regulated milk was intended.
He says Fonterra is happy to provide milk to processors without their own supply to ensure the domestic market has milk.
But Mr Monaghan says Fonterra would like to exclude large commodity exporters from the regulations because they are adversely affecting supply of raw milk to New Zealand domestic processors and, in any case, have their own milk supply.
He says Fonterra is also asking MAF to clamp down on what it calls gaming of the regulations by some commodity export processors, who it says have found a way of getting round the rules so they can buy extra regulated milk above their entitlement.
Independent processors are also seeking changes to the milk regulations because they say they still give Fonterra too much control of the market.
Dairy ingredient manufacturer Open Country Dairy chairman Laurie Margrain says some of the conditions which benefitted Fonterra when it was created 10 years ago are no longer relevant.
He wants to see the Ministry of Agriculture create a truly competitive market place in New Zealand for milk.