Fonterra in $42m Chinese farm deal

Fonterra chief executive Andrew Ferrier. Photo / Sarah Ivey

Dairy giant Fonterra has released details of a $42m investment in a new Chinese dairy farm it says will soon house 3000 cows and employ 100 locals in the northern Hebei province.

Fonterra said the investment signals the next step in its strategy to expand local milk production on the ground in China, following the successful pilot of its Tangshan Fonterra Farm.

Fonterra CEO Andrew Ferrier and Fu Zhenbo, deputy party secretary from Yutian County signed an agreement to set up the farm in a ceremony in Beijing today.

Ferrier said the fast-growing demand for dairy in China would be met by locally produced milk and he wanted to be working alongside the local dairy industry to help meet this demand.

Securing a safe supply of milk has been a priority for Fonterra in China since the Sanlu contaminated milk scandal in 2008.

Fonterra formerly owned a major stake in the Chinese dairy company Sanlu, which was at the centre of the melamine contamination scandal in which babies died after drinking its infant formula.

Chinese dairy products were recalled worldwide after it was found melamine, which is used to make plastics, was widely and illegally added to the products to give the appearance of higher protein.

Melamine was found in the products of 22 Chinese dairy companies in a massive scandal blamed for the deaths of at least six infants and for sickening 300,000 others in China.

The new free stall dairy farm, Fonterra Yutian Farm, will be developed on 42 hectares of land in Yutian County, Tangshan City, which is halfway between Beijing and Fonterra's existing farm in Hangu, also in Tangshan City.

Late last month Ferrier said Fonterra's long-term plan was to invest in up to 20 Chinese farms.

"What China needs is safe, healthy Chinese milk and it starts all the way up stream with farming," Ferrier said.

Fonterra, would also invest in the dairy ingredients side of its business in China.

"We obviously have customers that are looking at more manufacturing of [Fonterra] ingredients in China to complement products that are coming out of New Zealand," Ferrier said.

He said adding value to its products was another priority for Fonterra.

The firm's focus over the past two years on the production of infant formula, he said, was one example of this approach.

Fonterra said the new Chinese farm location had good access to water, feed supplies and locally grown crops like corn silage. It will consist of 12 barns, feed storage facilities, 24/7 milking parlour and waste water treatment systems.

Fonterra's first pilot farm in Hangu was set up in 2007 and has grown from 3000 cows to over 6000 and is producing around 25 million litres of milk for local consumption.

The new farm will house around 3000 milking cows, imported from New Zealand and is expected to employ around 100 local people, most of whom will live onsite in a housing facility.

The farm site construction will take around 12 months, with the new herd expected to start milking in November next year.

- HERALD ONLINE