Under the policy, qualifying domestic processors investing in new manufacturing infrastructure would gain access to up to 500 million litres of Fonterra-supplied milk per season for up to a decade. The proposed volume represents a tenfold increase over the current statutory DIRA limit of 50 million litres per processor, with the allocation tapering down across the final four years of the 10-year term to encourage independent supply development.

Peters maintained that Parliament originally established Fonterra with unique statutory scale on the premise that it would build a globally dominant, value-added export business for New Zealand. He argued that the cooperative’s retreat from consumer-facing finished goods to focus on bulk commodity ingredients warrants an aggressive state-level policy correction to support large-scale secondary manufacturers.

The policy proposal has triggered sharp debate across the primary sector and among dairy analysts. Critics and cooperative advocates contend that compelling Fonterra to divert massive volumes of raw milk to commercial competitors could strand capital in cooperative processing plants, distort farmgate pricing, and increase peak operational costs for dairy farmers without delivering tangible price reductions for domestic grocery shoppers.