Wellington - An angry New Zealand farmers' spokesman Saturday slammed the United States' dairy industry as a "compost heap" after Washington announced new subsidies to export 92,000 tons of dairy products.

"The US dairy lobby is more interested in protecting subsidies than in exporting on free market principles," Philip York, of the Federated Farmers' organization, said.

He said it was a genuine shock that President Barack Obama had caved into US farmers' demands to follow the European Union which restored subsidies on dairy exports.

"I honestly thought the age of pork-barrel politics had passed but I'm sadly mistaken," York said, adding that New Zealand farmers had respected American restraint in not retaliating against the EU earlier.

"That has all been thrown away on the compost heap that is the US dairy lobby," he said. "The world is back to five minutes to midnight for an all out trade war and President Obama needs to get his hand off the trigger."

The Fonterra dairy co-operative, the world's biggest single exporter of dairy products, handling more than one-third of the international market, said the US move would create uncertainty at a time that prices are low.

"This is bad news for the market and bad news for our farmers in New Zealand who compete internationally with no support or subsidies of any type," said Kelvin Wickham, Fonterra's managing director of global trade.

Trade Minister Tim Groser said the move would be damaging to world markets. "As the world trading system struggles to counter its greatest downturn in decades, there is enormous scope for increased protectionist measures," he said.

"In the current international economic environment the EU and the United States are hardly setting a good example."