Around 100 Canterbury growers could be impacted by Australian supermarkets moving to strip Kiwi products from the shelves.
Horticulture New Zealand chief executive Peter Silcock said the move could threatens over $500 million of exports, and New Zealand growers were "obviously very disappointed".
Two of Australia's largest supermarkets, Coles and Woolworths, have announced a Buy Australia campaign, with some New Zealand exporters having their goods removed.
Silcock said the decision was a result of pressure from Australian farmers.
"This is a commercial and political move. Aussie growers have campaigned for this," he said.
"They struggle to compete with us and get significant support from their state and federal governments. This is a pretty desperate measure, not in the spirit of CER [Closer Economic Relations pact] and it reduces choice for Australian consumers."
Canterbury grower David Hadfield, who is also chairman of Process Vegetables NZ, said the move made no real sense, as Australian growers did not have factory capacity to meet market demand.
"My belief is that they don't grow enough in Australia to be able to do that anyway, so they're going to have to import from somewhere"
He said New Zealand's food safety was higher and costs were lower than most other countries, so it would make sense to choose New Zealand growers.
Hadfield said growers would not feel the impact of the move immediately.
"All this year's stuff is already contracted, so it'll be next season that impacts growers."
Hardest hit is big New Zealand processor Talley's, which had previously been contracted to supply frozen and canned vegetables under the supermarkets' home brands labels.
Talley's is understood to have lodged a complaint with Australia's competition authorities and has lobbied the Government to lodge a formal objection under the Closer Economic Relations pact.
Prime Minister John Key said this week he would raise the issue with his Australian counterpart, Tony Abbot.
Silcock called for stronger country of origin labelling for New Zealand, to help promote locally grown products.
"Australia has mandatory country of origin labelling for food. We do not. The supermarkets are just responding to consumer pressure to buy Australian made. Kiwi shoppers can't do that, because we are not given the choice."
Silcock said the snub was not aimed only at New Zealand - many vegetables are sourced elsewhere.
The products primarily affected so far were frozen or canned vegetables, including peas, beans, corn and carrots.
- © Fairfax NZ News