Prominent dairy producer Lewis Road Creamery wants to see a full ban of the importing of palm kernel expeller to New Zealand, saying it's ruining our reputation.

Landcorp, the state-owned farming group announced yesterday it would discontinue use of the product, a waste product of palm oil, by June next year.

It's a big move, as according to the United States Department of Agriculture, New Zealand is the largest importer of PKE in the world, taking around a quarter of the world's PKE supply.

Founder of Lewis Road Creamery Peter Cullinane said the economic benefits for most farmers, and the wider New Zealand economy, far outweigh the few who would be negatively impacted.

He said New Zealand's greatest asset is the sheer amount and quality of grass we can produce, and it seems backwards to compromise our position by using one of the world's worst ingredients.

He said the pursuit of squeezing every drop of milk from cows in a production line is ruining New Zealand's green image.

Mr Cullinane said New Zealand cannot keep its place as a premium dairy provider when it uses such a product.

He said dairy in the future is all about quality instead of quantity, and Landcorp's move shows it's possible to farm without the product.

The production of palm oil has been widely blamed for deforestation in South East Asia.