Fonterra says it will work with its farmer shareholders to make sure they can meet a new condition of supply.
The dairy co-operative is making it compulsory for farmers supplying it with milk to fence off waterways under the Clean Streams Accord.
The 10,500 dairy farmers have 18 months from the beginning of next season to fully fence off waterways on farms.
Fonterra's general manager of milk supply, Steve Murphy, says since the signing of the Clean Streams Accord eight years ago, many farmers have fenced off waterways voluntarily, which has helped to improve the water quality of rivers and streams.
He says the new condition will ensure the other farmers do the same.
Mr Murphy says Fonterra will carry out checks where it believes the accord principles are not being met.
He says there have been times when Fonterra has indicated that if terms and conditions aren't met it won't pick up milk - and in some cases it has carried through with this.
But that's a last resort, he says, and Fonterra will work with farmers who are having difficulties to get them where they need to be.
Greens voice groundwater concerns
One of the critics of the dairy industry's environmental performance, the Green Party, says while the move is good progress, it doesn't address the issue of animal effluent polluting the groundwater, which runs off into waterways.
Greens co-leader Russel Norman says he wants to look more closely at the Clean Streams Accord definition of a waterway, which he says doesn't deal with the problem of nitrogen going through the groundwater.
He says in order to control the amount of nitrogen in the groundwater it's necessary to control the amount of nitrogen-based fertiliser going on the land, as well as stocking intensity.
Dr Norman says that's where the Greens would go further than Fonterra.
Farmer groups welcome plan
Two farmer representative groups have welcomed the move to make fencing waterways a condition of supply.
Federated Farmers says while it won't be popular across the board, 18 months is plenty of time to make sure fences are in place.
It says total stock exclusion from waterways will help to ensure New Zealand dairy exports continue to attract a premium in the global marketplace.
The Fonterra Shareholders' Council says the condition won't be hard to meet because most farmers already have fences around waterways or have plans to put them there.
