Fonterra spends $42m on new Chinese dairy farm

Wednesday 20th October 2010

Fonterra will spend $42 million on a new dairy farm in China as it looks to build its presence in the world's most populous nation.

The world's biggest dairy exporter and the Yutian County Government formally agreed to develop a new farm in the Hebei province, about 100 kms away from Fonterra's pilot farm in Tangshan.

Fonterra has entered into a long term lease to use the land, much the way that China-resident New Zealand business leader David Mahon suggested this week could work in this country to assuage fears about foreign ownership of local farmland.

The company's second Chinese farm is expected to begin milking in November next year, and will house 3,000 cows imported from New Zealand while employing about 100 locals.

"China is a very important market for Fonterra and we're committed to developing and investing in the local dairy industry over the long term," chief executive Andrew Ferrier said in a statement.

"Today's agreement further strengthens Fonterra's capacity to deliver a secure and sustainable supply of fresh dairy products for Chinese customers and consumers."

Fonterra stepped back from its investment in China after an earlier Chinese partner was caught up in melamine scandal in 2008 that left several infants dead after San-Lu's farmers added melamine to the milk to lift its protein.

The farm is expected to produce about as much milk as the Tangshan pilot, which has doubled its muster to 6,000 cows and is producing about 25 million litres for local consumption. Milk from the new farm will be audited under Fonterra's standards of excellence.

Businesswire.co.nz

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