New Zealand dairy company confirms new farm in China

Oct 20, 2010, 7:58 GMT

Wellington - New Zealand's Fonterra Co-operative Group Ltd, the world's biggest exporter of dairy products, confirmed Wednesday that it would establish a second farm in China next year.

Chief executive Andrew Ferrier signed a joint venture agreement Wednesday in Beijing with the government of Yutian County in north-eastern China's Hebei province, the company announced from its headquarters in Auckland.

The new farm is to start milking about 3,000 cows to be imported from New Zealand in November next year.

Ferrier said Fonterra's 42-million-New-Zealand-dollar (31.5-million-US-dollar) investment signalled the next step in its strategy to expand local milk production in China after the establishment of a successful pilot farm, now producing 25 million litres of milk annually, in Hebei's Tangshan city.

Fonterra's first foray into China in 2005 when it spent 200 million New Zealand dollars to buy a 43-per-cent stake in the San Lu dairy company ended in a disastrous scandal three years later when the Chinese partner was involved with a number of other companies in producing infant milk powder tainted with the industrial chemical melamine.

Six babies died and another 300,000 were reported sick after drinking contaminated milk. San Lu's boss was jailed, and the company collapsed. Fonterra wrote off its investment, the biggest ever by a foreign dairy company in China, and vowed that it would insist on total control of local milk in any further venture.

'The fast-growing demand for dairy in China will be met by locally produced milk, and we want to be working alongside the local dairy industry to help meet this demand,' Ferrier said.

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