The NSW Health Department is under fire for handing a milk contract to foreign-owned Dairy Farmers at the expense of local supplier Norco.

Norco has been dumped as the supplier to 15 north coast health facilities from Tweed Heads to Port Macquarie.

The contract has been awarded to Queensland's Dairy Farmers which is owned by Japanese brewer Kirin Holdings.

Health Services Union secretary Gerard Hayes said Lismore hospital staff have reported some patients are refusing to drink the hospital milk unless it is Norco.

The Health Department's service provider HealthShare has been contacted for comment.

The State Government has defended the decision with Minister Brad Hazzard stating Norco "did not offer the most economical price for taxpayers".

The Minister noted Norco has dairy farms in Queensland and Norco did not state in its application milk would be solely from NSW.

Farmers gutted

Kempsey dairy farmer Sue McGinn who supplies Norco says it is "disappointing".

She said dairying is a "tough gig" and it comes on the back of difficult conditions for farmers.

The dairy co-op's general manager Andrew Burns confirmed it has been overlooked in favour of a competitor.

"It's a local brand and we do take that to heart," he said.

"We would have liked to have thought that a local supplier working within the local community would continue to supply local businesses.

Social media anger

The decision had a strong reaction on social media.

The Nationals Member for Lismore Thomas George said he was disappointed with the decision and would lobby the Minister in a meeting on Tuesday.

However, Mr George said it would not affect the milk volume and the production from producers.

"I just want to re-assure everyone that it's not going to have an effect on our dairy farmers," he said.