Chinese dairy move shakes up industry

Fonterra's Andrew Ferrier says it depends who processes the milk. Photo / Dean Purcell

Bold plans by a Chinese company to expand into the dairy industry are getting mixed reactions as the sector waits for details.

The Productive Economy Council said plans by Natural Dairy (NZ) Holdings to buy up the Crafar dairy empire should start alarm bells ringing with the public.

Council spokesman Selwyn Pellett said it was nonsense thinking it did not matter where ownership of New Zealand's productive assets resided.

"The public realised it was nonsense when previous governments pursued asset sales as some type of economic silver bullet, and they should realise it remains nonsense today," Pellett said.

Federated Farmers president Don Nicolson said the fear that foreign ownership meant benefits would be lost overseas was misplaced.

"I think it is a bit misplaced if you've got the right institutions in New Zealand to make sure they pass all the hurdles.

"Putting up barriers through compliance regimes or restrictions and things like that is not going to make us a wealthy country."

The land could not be taken away, he said.

"The person that owns the land works the land, abides by New Zealand laws, pays taxes in New Zealand, employs New Zealand people ... that's surely a good thing."

There were many foreign companies joint venturing with New Zealanders.

"New Zealanders have got many instances of investments overseas including New Zealand farmers who have gone to Uruguay or Australia or America or even China [where] Fonterra has farms.

"So we're doing it the other way."

However, Fonterra shareholders should be rightly wary, Nicolson said.

"Because if they're taking supply out of that company and they obviously will be if some of those farms supply the Fonterra mix and they're not going to supply Fonterra they're going to supply into their own company, their own production systems, then that must be a worry for Fonterra."

Fonterra chief executive Andrew Ferrier said yesterday the chance that Chinese investment could compete with Fonterra would depend on whether they wanted to put in processing assets or put milk through Fonterra.

Auckland lawyer Kerry Knight from Knight Coldicutt, speaking on behalf of Hong Kong stock exchange-listed Natural Dairy, said the venture would not compete with the market of Fonterra.

Knight said: "The only competition to Fonterra is we're taking milk supplying [from] Fonterra farms that otherwise would make milk powder and converting it into a higher product."

Deputy Prime Minister Bill English said yesterday there had been an overreaction to Natural Dairy and its plans, given the scant information available.

Natural Dairy has submitted an OIO application for its latest proposed acquisition and English said he was confident the deal would be vetted thoroughly.