Fonterra is set to increase its milk production in China after signing an agreement today to develop two more large-scale dairy farms.

The investment agreement with Yutian County completes Fonterra's 'hub' of five farms in Hebei Province.

Fonterra said the two farms were located 120km east of Beijing, and would house about 3,350 cows each on an 80-hectare site.

The farms would produce up to 65 million litres of milk a year once fully operational, the dairy giant said.


The investment was part of Fonterra's strategy to build a local milk pool in China, said Fonterra Greater China and India president Kelvin Wickham.

"The demand for dairy in China is expected to double by 2020 and much of this growth will be met from local production.

"We need to build a safe, sustainable local milk supply to feed this growth."

Fonterra's five-farm hub - expected to produce about 150 million litres a year - was the first of many, Wickham said.

"We intend to follow this farming hub with several more through China, with the ultimate goal of producing up to 1 billion litres of high quality milk by 2020."

A herd of China-born cows with about 4,300 cows shipped from New Zealand would be run on the hub, said Fonterra China Farms general manager Nicola Morris.

"We will be utilising the great farming and animal husbandry talent that we have developed on our existing farms, to make up the 175-strong workforce we need to employ locally.

"We have a very well established training and development programme across our farming businesses in China which is helping to feed the talent pool needed to manage these farms to Fonterra's high standards."


Construction on the farms will begin in December 2012 and the farm is expected to open in October 2013.

The agreement was helping Yutian County solidify its position as a national agricultural demonstration zone, said Zhang Yaowu, deputy magistrate of Yutian County.

"We welcome the impact this will have on our local economy."