Deal paves the way for Fonterra’s new China “hub”

By RJ Whitehead

- Last updated on GMT

Agreement sets out to complete Fonterra’s China “hub”
Fonterra has announced concrete plans to step up milk production in China after the New Zealand dairy giant signed an investment agreement to develop two more large farms in Hebei province.

The two farms will complete Fonterra's "hub" of five farms in Hebei. Located 120 km east of Beijing on a double site of 80 hectares, the farms will house around 3,350 milking cows each and collectively produce up to 65m litres of milk a year once they are fully operational.

Integrated milk pool

Fonterra Greater China and India president Kelvin Wickham said the investment was part of Fonterra's strategy to build an integrated milk pool in China.

"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​, " Wickham said in the statement.

"[This] announcement completes our first farming hub in Hebei Province. Once fully operational, it is expected to produce around 150m litres a year. We intend to follow this farming hub with several more throughout China, with the ultimate goal of producing up to 1bn litres of high quality milk by 2020."

The double site will operate as two separate farms, each with milking parlors and cow barns, but they would share common facilities like workshops, feed mixing areas, effluent treatment and staff accommodation.

Indigenous cows

Fonterra China farms general manager Nicola Morris said the herd would be made up of China-born cows bred on Fonterra's other farms and supplemented by around 4,300 cows shipped in from New Zealand.

"We will be using the 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​," Morris said.

"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​."

Development will begin in December and the farms were expected to open in October 2013.

In May, Fonterra announced it would develop unique products for the booming Chinese market at a new innovation centre in Shanghai that would employ local staff trained in product formulation, product production, operating procedures and food safety systems.

Fonterra is the biggest processor of milk in the world, producing more than 2m tons of dairy ingredients and products every year, and employing more than 16,000 people.

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