2 Feb 2010 --- Fonterra has announced it intends to invest in two more dairy farms in China, to continue growing a high quality and secure supply of milk on the ground.

Philip Turner, Managing Director for Fonterra China, said that the Chinese dairy industry is continuing to develop quickly but that the current supply of high quality fresh milk cannot keep up with demand.

“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.”

The China dairy market is set to become the world’s largest dairy market in the next few decades and is forecast to experience double digit annual growth over the next 10 years. The Chinese Government has acknowledged that the development of the dairy farming industry is not only crucial for meeting the growth in demand, but also for developing rural communities and their livelihoods.

Mr Turner said Tangshan Fonterra Farm, Fonterra’s pilot farm in Hangu established in 2007, had succeeded in demonstrating that Fonterra can successfully produce New Zealand standard milk in China. It has reached target production levels ahead of timetable and is producing record levels of milk for China.

“We are confident that with further investment in good technology, people and high quality genetics, we can replicate this model on further farms. 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 in Hebei Province and will consider partnering on the investment. However, Mr Turner said Fonterra would want to have full management of the farms.

“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.”

Mr Turner said due diligence was already underway and the aim was to complete the final long-term lease agreement by mid-2010.

Tangshan Fonterra Farm is already producing its second generation of China born heifers, following two successful rounds of calving since the farm was first established. The total herd has grown to nearly 5800 cows, around half of which have been raised from the original imported herd of Friesians.

Each of the new farms is planned to be of similar size to Hangu, with around 35 hectares of land and around 3300 milking cows, creating employment and training opportunities for 350 people in Hebei Province.

Tangshan Fonterra Farm manager and experienced veterinarian Todd Meyer said the second round of calving was proof that Fonterra had successfully adapted the New Zealand-quality herd to the farming environment in China.

“We couldn’t have asked for a better result. We have introduced new China-born blood into our herd and are meeting our production targets for high quality local milk.”