Fonterra plans dairy farm hubs

New Zealand's Fonterra Co-operative Group Ltd, the world's largest dairy exporter, plans to build four to six farming hubs in China by 2020 that will produce 1 billion liters of milk to meet rising demand for dairy products.

The dairy producer has five farms at its first hub in Hebei province and is building a second hub of five farms in Shanxi province.

Henk Bles, managing director of international farming ventures at Fonterra, said that the location of farms is critical, because these facilities must meet standards for soil and water quality, climatic conditions and sufficient feed for cows.

"We have a time frame for the next six or seven years. Most importantly, when we decide to do it, we want to do it in a proper way," Bles said during the 12th World Dairy Expo and Summit held in Xi'an, which started on Friday.

Carl Worker, New Zealand's ambassador in China, said that New Zealand's dairy exports to China grew 55 percent in 2013. Last year, out of the country's total exports worth NZ $48 billion ($41.5 billion), 30 percent were dairy products, and one-third of the dairy exports went to China.

New Zealand is the world's largest dairy exporter. Most milk is consumed domestically, with only 7 to 8 percent being exported. New Zealand accounts for one-third of global exports of milk.

Worker said that Chinese consumption patterns have a major impact on production structures in New Zealand. Dairy producers in New Zealand have discovered that there is a great demand for long-life ultra-high temperature milk in China, so New Zealand dairies have increased processing of UHT milk for the Chinese market.

Over time, Worker said, New Zealand dairies are also likely to make less butter and cheese, as these items aren't that popular in China.