February 25, 2014
China invests in establishing new milk plants
China is in negotiations to bankroll construction of several new milk powder plants in New South Wales as the state''s dairy industry looks at ways to supplement its supply contracts with the big supermarket chains.
Over the past six months Chinese executives have been visiting locations in the state''s Hunter Region, the Central West and the Southern Highlands where the plants would be constructed to supply milk powder to the Chinese market.
The plan is being brokered by Dairy Connect, a not-for-profit organisation that represents the NSW dairy industry, including dairy producers, milk vendors, processors, manufacturers and industry stakeholders.
"We have had conversations where these groups are prepared individually to put $200 million on the table," says Dairy Connect chief executive Mike Logan.
Logan said the plan had the support of more than 500 dairy farmers across the state and Norco, the main co-operative in the region that this year took over supplying and bottling Coles'' house-brand milk for its stores in NSW and southern Queensland.
Under the plan, greenfield powder sites would be built for about US$40 million each at strategic locations to supply the Chinese market and give local milk producers a lucrative alternative to dealing solely with the supermarkets.
There is only one small milk powder plant in NSW, at Casino.
The global price for whole milk powder had jumped 65% over the past 12 months, yet Australia''s production of milk powder fell 22% last year. But Logan said some farmers were sceptical about the plan because of their preference for supplying milk for branded dairy products.
News of the plan comes after Hong Kong-based investor William Hui paid about US$70 million earlier this year for Melbourne-based United Dairy Power, one of the country''s largest privately owned milk suppliers.
Canadian giant Saputo last month beat local rivals Murray Goulburn and Bega Cheese for the listed Warrnambool Cheese & Butter, highlighting the level of interest in the dairy sector from foreign investors.
The milk powder plan was discussed at a Chinese New Year agribusiness forum in Melbourne staged by advisory firm PBB and convened by the firm''s agribusiness partner Greg Quinn.
The forum was attended by former ASIC chairman Tony D''Aloisio, a non-executive director of PBB, who said investment in the sector by the federal government''s Future Fund could help draw funding from competing funds both offshore and domestically.