Fonterra seems set to revive its ambitions in China but remains cautious about expanding on its three-farm base after exiting the SanLu company because of the melamine milk poisoning crisis.
Pandora Beads WholesaleThe co-operative sells 203,000 tonnes of mainly dairy ingredients into China, about 10 per cent of its total product, and received approval to add two more farms this month to its trial Tangshan Farm in Hangu, in the Hebei province. This farm has 5200 cows and calves with 2600 mature cows sometimes milking three times a day in a covered feedlot operation.
Fonterra trade and operations managing director Gary Romano said the co-operative realised it would have to invest in local facilities and wanted to re-establish a brand position but would be acting cautiously.
He said the co-operative had a 70 per cent market share in food services such as butter and cream in China and wanted to maintain this share in a sector set to explode.
However, the co-operative would make sure its three farms were successful and worked carefully to establish credibility before looking for further opportunities.
"We are going to invest in another two farms and we will see how we go. We are keen to see a large footprint in China."
He said the cows were thriving at least as well as if they were farmed in New Zealand and Fonterra had no issue with the style of housed feed lot farming as temperatures could get to below 30 degrees Celsius.
A $200 million partnership in the SanLu dairy processing company was written off by Fonterra last year after it was badly advised by its Chinese partners during a melamine milk poisoning crisis, which caused the deaths of several infants. pandora charms
Gaining full control of a Chinese operation would be Fonterra's first desire after this disaster, but the nation's government and rules makes this difficult and a joint venture is the most likely prospect.
Romano said controlled ownership or a percentage of ownership would be the easiest route.
"Everyone wants to partner with us and put a plant in China and at the moment we are cautiously looking at who we might partner. Right now there is zero."
He said the co-operative realised further investment would be needed to have a large presence in China.
"Three farms ain't going to cut it and our desire is to have a large footprint in China. Without SanLu, one to three farms looks a bit stranded so we have to do something."
Fonterra owns 85 per cent of its first farm and sells high quality milk independently for a premium to manufacturers in Beijing.
China and its 1.4b nation is an important market, helping to drive world commodity prices up.
The nation produces and consumes 22 to 28 billion litres of milk a year and the predictions are this will increase to 80 billion litres in the next decade.
Romano said China would be unable to produce this much milk itself.
He said dairy corporations were already established in China including fake rolex Minglu and the Cullen Fund and Fonterra had to be among them.
Further setbacks were likely in an emerging nation such as China and this was why the co-operative needed to expand cautiously, he said.
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