Farmers are worried that Fonterra's drive to join the sharemarket could cut into their incomes, despite government assurances.
Fonterra is proposing to keep around 65 percent of shares under the ownership of the farmer co-operative, around 15 percent ownership by individual farmers and 20 percent of shares will be sold to the public.
Finance Minister Michael Cullen assures farmers the move will be in New Zealand's best interests.
Waerenga dairy farmer Jim Cotman said farmers want to know how Fonterra would pay for their milk products "when we don't own any processing facilities" and how easy it would be to sell his dairy farm and his shares for a fair price.
A number of farmers went into the industry with strong beliefs around the principles of the co-operative model. He said those farmers would have some major philosophical thoughts to work through over the next few years.
"I think [Fonterra] could be a very successful company – not sure yet that it needs to public list to continue to be a successful company - it is already New Zealand's number one company.
"There are some doubts in some farmers' minds," Mr Cotman said.
New Zealand First MP Doug Woolerton said listing shares on the stock market could be disastrous.
"Under the proposal, 49 percent of the company could eventually be owned by non-New Zealanders. Given the significant impact of dairying revenue on your economy, it is hard to see how this proposal can benefit our country in the long run."
Mr Woolerton maintains that government and industry proposals to provide safeguards will not protect farmers' interests.
"They say that they are going to put in things that will restrict ownership overseas but you can't actually do this ... And once you start selling down that new company...you can't stop where it ends up."
Mr Woolerton said under the current co-operative arrangement, all profits are reflected in the milk price.
"This will no longer be the case under the proposed restructuring, with profits being extracted from the milk price to allow a return to be passed on to investors," Mr Woolerton said in a press release.
"With one of the best credit ratings of any business, Fonterra can expand as they wish without selling any of the company."
Under the proposal Fonterra would split and two companies would be formed - a 100 percent farmer-owned and controlled co-operative, and a subsidiary company carrying the assets and liabilities of the present co-operative.
Farmers will retain 100 percent controlling interest in both companies during a two-year consultation period, and farmer shareholders will be asked to vote in two stages.
The first vote will occur in May 2008 to set up the two proposed companies.
It will also address farmer's concerns over a lack of transparent milk-pricing mechanisms.
In 2010, farmers will be asked to vote again on whether they wish to list the shares of the subsidiary company on the New Zealand Stock Exchange and raise investment capital.
The proposals must be approved by 75 percent of farmer shareholders.
Co-op and Fonterra Tension
Waikato farmer Gary Reymer does not fear the impact of overseas investors.
He believes that the competition for shares will come from locals – retired farmers, sharemilkers and managers wanting to reinvest in the industry.
"Certainly, I am happy with the proposal – the biggest issue I see going forward is still that tension between the farmers' co-op and Fonterra and we haven't got any detail on how they are going to set the milk prices."
The new proposals allow farmers the choice to invest in more land or "capitalise on some of the investments that Fonterra is making in other areas around the world," Mr Reymer said.
Standard and Poors, an independent credit rating agency, are warning that Fonterra's credit rating may drop under the proposed restructure.
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