Fonterra wants to build a new milk power plant at its Pahiatua site near Palmerston North to ease demand on its existing driers.
The new plant would process 2.5 million litres of milk per day, producing up to 85,000 metric tonnes of milk powder a year.
Fonterra says it does not know what the new plant would cost, but it is similar in size to the one recently opened at Darfield in Canterbury which cost $200 million.
New Zealand operations director Brent Taylor says the co-op needs a third drier in the lower North Island to ease processing pressure on its other plants.
"Our two existing driers at Pahiatua are already running at capacity, processing 1.4 million litres a day.
"For the past 12 years we have had to send at least 1.6 million litres a day by rail to our site at Whareroa to process."
He says Fonterra proposes building the plant at Pahiatua over other North Island sites because of its proximity to infrastructure such as a port and rail lines.
"At this stage it is very early days and our first priority is to talk with the local community before any formal decision is made."