Fonterra to develop third dairy farm hub in China

Posted by AFN Staff Writers on 16th July 2014
Fonterra to develop third dairy farm hub in China
Fonterra to develop third dairy farm hub in China

New Zealand-based global dairy giant Fonterra Co-operative Group Ltd (Fonterra) has announced it has signed an agreement with US pharmaceutical and health care company Abbott Laboratories (Abbott) to develop a proposed dairy farm hub in China.

Fonterra said the strategic alliance, which is subject to Chinese regulatory approval, will leverage Fonterra’s expertise in dairy nutrition and farming in China and Abbott’s continued commitment to business development in China.

Dairy consumption in China has been rising steadily over the past 10 years. Fonterra said the continued development of safe, high-quality milk sources was essential to meeting this growing demand from Chinese consumers.

“This would be Fonterra’s third farm hub in China and will complement our existing farming operations in Shanxi and Hebei Provinces that have been very successful,” said Theo Spierings, Fonterra Chief Executive. “Farming hubs are a key part of our strategy to be a more integrated dairy business in Greater China, contribute to the growth and development of the local Chinese dairy industry and help meet local consumers’ needs for safe, nutritious dairy products,” he said.

Both companies will work with Chinese regulators to obtain necessary approvals through the course of the project’s development.

If approved, Fonterra and Abbott will form a joint venture to invest a combined US$300 million (NZ$342 million or 1.8 billion RMB) into the farm hub, which will contain up to five dairy farms and more than 16,000 dairy milking cattle in production, producing up to 160 million litres of milk annually. The herd for this hub will comprise animals either imported, or sourced from Fonterra’s existing farm hubs. All dairy cattle will have genetics traceable to New Zealand, Australia, USA or Europe.

As the world’s largest global milk processor and dairy exporter, Fonterra said it brings “industry-leading dairy standards and practices to farm operations”. The Company said the Fonterra – Abbott joint venture will operate the farm hub in China to these same standards to produce high quality dairy.

“We’re pleased to partner with Fonterra, a global leader in dairy science, on this alliance to build dairy capacity in China,” said Miles D. White, Chairman and Chief Executive Officer, Abbott. “This is a very important step in our growing commitment to Chinese consumers,” he said.

Pending regulatory approval, the first farm is expected to be completed and producing milk in the first half of 2017 and the remaining farms will commence production in 2018.