New Zealand's Fonterra Sees Brazilian Opportunity

BRAZIL - Fonterra Co-operative Group confirmed today it was in the final stages of plans to purchase land to develop a pilot dairy farm in Brazil in line with its strategy to establish best practice dairy farms in the fast growing economies of Asia and Latin America.

13 May 2011

3 minute read

South America

Fonterra is currently developing a second dairy farm in China and is conducting a feasibility study into a joint venture dairy farm in India.

Fonterra said today it had signed a conditional sale and purchase agreement to purchase an 850 hectare farm in the mid-west of Goias Statein Brazil. Fonterra was now conducting final due diligence with a view to concluding the sale next month.

The intention was to develop two milking platforms with a total herd of 3,300 cows, which would be producing high quality milk by late 2014.

CEO Andrew Ferrier said Fonterra’s investment in the pasture based dairy farm would be the first step in developing a source of high quality fresh milk in Brazil to support Dairy Partners Americas (DPA), Fonterra’s South American joint venture with Nestle.

“We have already invested through DPA in helping to improve the efficiency of dairy farming in Brazil,” Mr Ferrier said. “This pilot project will allow us to develop and test the right model for our own dairy farming operation.”

“Brazil is Latin America’s largest economy, with 200 million people. The growing and increasingly prosperous population is driving strong demand for fresh dairy products. This demand will be met by milk produced locally.”

The proposed Brazil farm location offered good access to water, while the soil quality, temperature and climate would allow year-round farming on the pastoral model.

The farm will be managed according to Fonterra’s Standards of Excellence for milk production, to ensure the production of safe, traceable, high quality milk. If the pilot proved successful, Fonterra intended to develop more farms in Brazil.

Mr Ferrier said global demand for dairy products was forecast to rise steadily. The Food and Agriculture Organisation of the United Nations predicts there will be an additional 2.3 billion people by 2050, requiring a 70 per cent rise in agricultural production.

“Demand for dairy around the world is growing by two per cent per annum,” Mr Ferrier said.

“New Zealand milk will always be our top priority. While New Zealand milk production is forecast to grow at a long term average of two per cent – three per cent, we are looking offshore to supplement this and ensure we meet the growth potential for dairy globally.

“Developing sustainable, high quality milk supply for key customers in rapidly developing economies such as Brazil and China is a powerful way of achieving our strategy of being the natural source of dairy nutrition for everybody, everywhere, every day.

“We are sourcing more milk overseas - 6.6 billion litres last year, or around 31 per cent of our total. Our international farming operations are in line with this strategy of complementing New Zealand milk.”

Fonterra has already developed a successful dairy farm in China and is conducting a feasibility study into a potential large-scale joint venture dairy farm in India.

Fonterra established its 6000-cow Tangshan Fonterra Farm in China in 2007 and last year announced plans to develop a second farm in Yutian County.

Memorandum of Understanding has been signed with IFFCO (Indian Farmers Fertiliser Co-operative) to jointly conduct a feasibility study into a pilot dairy farm in India as a first step towards the vision of establishing large-scale world-class dairy farms in India.