Fonterra to establish second farm hub in China

Fonterra, a New Zealand-based multinational dairy co-operative, is set to establish its second farming hub in Ying County, Shanxi Province, China, to boost its fresh milk production capacity in the country.

The co-operative is currently looking for potential strategic partners for the project.

The investment in the Ying County hub is the next step in the company’s strategy to produce up to 1 billion litres of milk in China by 2020.

The farming hub will feature five 3,000-cow farms and will employ over 500 people, of which about three quarters will be from Ying County, the co-operative said.

It is expected to go onstream in the second half of 2014.

Fonterra Greater China and India president Kelvin Wickham said that the development of the new hub is part of the company’s strategy to become a more integrated dairy business in China and to contribute to the growth and development of the local Chinese dairy industry.

"Having secured the right location in the Shanxi province we are now able to approach potential strategic partners," Wickham added.

"Ying County provides an ideal environment for us to expand our farming operations due to its new agricultural zone, proximity to customers and the high-quality supply of animal feed available in surrounding areas."

Fonterra stated that the latest investment builds on the existing investment in Hebei Province and will help the company cater to the demand for fresh milk in China.

Over the past three years, raw milk supply growth in the country has been 2%, while demand has increased by 6%-8%.

Wickham continued: "So there are significant opportunities for Fonterra to help bridge this supply gap by growing our own domestic milk supply in China and continuing to import our high-quality finished dairy products."

"We have received strong support from many levels of government in China and we are looking forward to continuing to build strong partnerships with our local communities in both Shanxi Province and Hebei Province over the coming years."

Upon reaching full production rate, Fonterra’s two hubs will together produce about 300 million litres of milk per year.

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Image: The investment in the Ying County hub is part of the company’s strategy to produce up to 1 billion litres of milk in China by 2020. Photo courtesy of Alessandro Paiva.