WELLINGTON -- The world's biggest dairy company Tuesday announced an expansion of its production in China with an agreement to invest 260 million yuan ($40 million) in its third Chinese dairy farm.
New Zealand-based Fonterra, a farmer-owned cooperative, said the agreement with the government of Yutian County, Hebei Province, was the next step in its strategy to build a high-quality and sustainable fresh milk supply for the Chinese market.
The 40-hectare farm was expected to raise Fonterra's total milk production in China to around 90 million liters of fresh milk every year.
"The demand for milk in China is expected to triple over the next 10 years, and much of this demand is for liquid and fresh milk products," said Philip Turner, president of Fonterra China, in a statement from Fonterra.
"Our future in China is underpinned by our ability to grow high-quality local milk production for our customers and by playing a strong role in the development of the local dairy industry."
Peter Moore, chief operating officer of Fonterra International Farming Ventures said the firm's pilot farm project, established in Hangu in 2007, demonstrated Fonterra could successfully produce high quality local milk profitably.
"Today's announcement of our third farm investment agreement is the next step in our plans to build a hub of farms in Hebei Province in the next five years," said Moore.
Ji Xinglong, Mayor of Yutian County, said Fonterra's two farms in the region were helping to build Yutian's reputation as a key national agriculture demonstration zone.
"We welcome the investment in the area and will support them in any way we can to ensure they have the right environment for their operations," said Ji.
Fonterra Yutian Farm Two would be developed on 611 mu of land ( 40.75 hectares) in Yutian County, Tangshan City, 130 km from Fonterra's existing farm in Hangu and 9 km from the first farm in Yutian County.
It would house around 3,200 milking cows, which were expected to produce around 28 million liters of milk a year, and would train and employ around 100 local staff.
Construction would begin in November and was expected to be completed by late 2012.
Moore said good progress had been made on Fonterra's first farm in Yutian, since the signing of the investment agreement in late 2010.
"We transferred the first 1,140 heifers to Fonterra Yutian Farm in June and we expect another 3,000 to be delivered from New Zealand in October 2011. We are on track to start milking in November this year."
Fonterra would sell milk from the new farm to leading local and international dairy brands in China, said the statement.
Fonterra, best known for its Anchor brand of products, is the largest processor of milk in the world, producing more than 2 million tonnes of dairy products every year and employing 16,000 staff.
Fonterra had a 43-percent stake in the Hebei-based Sanlu dairy company, which collapsed in late 2008 after thousands of babies fell ill and six were believed to have died after consuming infant formula contaminated with the industrial chemical melamine.
