Fonterra milking Chinese demand, expanding farm operations

Tuesday 2nd February 2010

Fonterra Cooperative Group, the world’s largest exporter of dairy products, is increasing its Chinese production base with an investment in two new dairy farms in the north east of the country.

The dairy cooperative plans to follow-up a pilot farm that’s produced a second generation of China-born heifers with two new farms of a similar size with around 35 hectares of land for 3300 indoor-kept cows. The pilot has a total herd size of 5800 cows, around half of which have been raised from the original imported Friesians.

“The current supply of high quality fresh milk cannot keep up with the demand,” even as the Chinese dairy industry develops quickly, said Philip Turner, managing director for Fonterra China in a statement. “We are looking to help grow a safe, secure and sustainable milk supply in China in order to meet this demand and expand our customer base.”

China expects double digit annual growth in milk demand over the next 10 years.

The Tangshan Fonterra Farm pilot established in Hangu in 2007 has demonstrated that New Zealand standard milk can be produced in China. Target production levels have been reached ahead of schedule, with record levels of milk being produced for China.

Each farm will create employment and training opportunities for 350 people in Hebei Province.

“We are confident that with further investment in good technology, people and high quality genetics, we can replicate this model on further farms,” Turner said. “This will complement our New Zealand milk supply and help us better meet the needs of our key customers, who are increasingly looking for local sourcing capability.”

Fonterra has identified several possible sites for the new farms, and while it will consider partnering on the investment, the co-operative wants to have full management of them.

“It is important that we keep the next two farms in close proximity to Tangshan Fonterra Farm in order to achieve efficiencies in transport, milk supply and Fonterra management,” Turner said.

Due diligence on the possible farm sites is underway, and Fonterra aims to complete the final long-term lease agreement by mid-2010.

Businesswire.co.nz

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