Fonterra is to invest $40m (€35m) in its third Chinese dairy farm as the firm expects demand to treble in the region over the next ten years.
Philip Turner, president of Fonterra China said there was particular demand for liquid and fresh milk products.
The 40-hectare farm is expected to increase Fonterra’s overall milk production in China to around 90 million litres, said the global dairy giant.
Milk produced from the new farm will be sold to leading local and international dairy brands in the country, said Fonterra.
Previous China projects
The new free stall dairy farm, Fonterra Yutian Farm Two, will be developed on 611 mu of land (40.75 hectares) in Yutian County of Tangshan City, which is within 130 km of Fonterra’s existing farm in Hangu and within 9km of the first farm in Yutian County.
Based on a similar design to Fonterra’s Yutian Farm, the new farm will house around 3,200 milking cows, which are expected to produce around 28m litres of milk per year.
Farm construction will start in November 2011 and is expected to be completed by late 2012.
Peter Moore, CEO of Fonterra International Farming Ventures said the firm’s pilot farm project, established in Hangu in 2007, had already demonstrated that the company could successfully produce “high quality local milk profitably”.
He said the construction of Fonterra’s second farm in Yutian County was also progressing well.
“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,” he added.
First Bond issue
The company is also planning to expand its activities in China from seven cities to 15 over the next three years, Turner said last week.
The CEO expressed the firm’s plans as Fonterra announced its intention to issue its first bond denominated in Chinese renminbi.
“As our business with Chinese customers expands, it makes sense to seek a greater alignment between our Treasury borrowing and our business activities,” said Stephan Deschamps, general manager, treasury, at Fonterra.