Fonterra, Abbott to build dairy farms in China

New Zealand dairy co-operative Fonterra and US healthcare company Abbott are planning to build up to five dairy farms in China to secure domestic supply to meet rising demand for milk in China.

In a media statement, Fonterra, the world’s largest dairy exporter, and Abbott, a major infant formula seller in China, said they had signed a US$300 million agreement to build up the farms, which would produce up to 160 million litres of milk each year.

The planned hub, whose location is yet to be decided, would be Fonterra’s third, following similar dairying centres in China’s Shanxi and Hebei provinces.

If the plan is approved by Chinese authorities, the companies said, the first farm would begin producing in early 2017.

“Farming hubs are a key part of our strategy to be a more integrated dairy business in Greater China, contribute to the growth and development of the local Chinese dairy industry and help meet local consumers’ needs for safe, nutritious dairy products,” Fonterra CEO Theo Spierings said in a statement.

The deal would build on the existing relationship between the two companies, as Fonterra counts Abbott as a wholesale client of its milk powder products, which include Similac infant formula brand.

Meanwhile, Abbott is expanding its production capabilities in China, opening an infant formula plant near Shanghai in June.

“This strategic partnership gives us flexibility for the future on however we use milk,” an Abbott spokesman said.