Fonterra's China expansion a smart move

Fonterra's expansion into China is being labelled a smart move.

The dairy giant is to spend $100 million developing two new large-scale dairy farms in the Hebei province, taking the total number of farms it owns in the area to five.

New Zealand Farmers Weekly journalist Richard Rennie says Fonterra's ability to continue expanding in New Zealand is always going to be limited by the number of suppliers, and availability of land.

"It makes a lot more sense to do it within the shores of your largest market, rather than trying to ship milk across thousands of kilometres of ocean to get it to where it needs to be."

Mr Rennie says demand for milk in China is expected to triple in the next 10 years.

He understands Fonterra is aiming to develop 25 farms in China.

"It's going to be a question of, can Fonterra's suppliers come up with the money as shareholders and how much pressure will it put on the need for more external funding for Fonterra."

Fonterra's chief operating officer for international farming, Peter Moore, says this can easily be achieved.

"We've been building a team since late 2007, early 2008. We've a great team, a combination of expats and predominately local Chinese, so we're very confident we've got the teams to do this now."

Mr Moore says Fonterra wants to produce one billion litres of milk in China by 2018.

Photo: NZ Herald