Why export when you can milk it abroad?

SIMON DAY
Last updated 05:00 26/05/2013
Dairy
Simon Day/FairfaxNZ
High returns: Workers at Fonterra’s Yutian 2 farm use an intensive style of farming which yields 32 litres a day per heifer – nearly twice that of comparable Kiwi cows.

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Hundreds of plump cows line their concrete stalls like rows of dominoes at Fonterra's Yutian 2 farm, 120 kilometres east of Beijing.

The cows push their heads through the steel bars of their confinements to eat imported alfalfa feed off the floor. Fans line the roof of the long barns, cooling the herd on a hot China day.

There is no grass in sight.

These are Kiwi cows, shipped to China or bred locally from New Zealand genetics. But this looks nothing like New Zealand farming.

Fonterra's China feed-lot farms have around 135 cows per hectare. This land-use efficiency is impossible in the fields of New Zealand, where pastoral farms have about three per hectare.

And the cows can be farmed so intensively in China because of New Zealand agriculture skills passed on to the Chinese staff.

"It's the same if you are in a paddock in Hamilton or a barn in Yutian. It is how well you look after that animal, it's the people you have got doing the job," says Nicola Morris, general manager of Fonterra China Farms.

The animals are alert and clean. Three times a day they amble their way to the milking parlour with the same compliant lethargy of Kiwi cows.

"You won't see a more comfortable, happy, healthy animal," she says.

In a country where foot and mouth disease is endemic, the biosecurity of the farm is intensely protected and the genetic IP of the herd is closely guarded.

Not only is land use maximised but also milk production. In confinement, heifers are producing 32 litres a day - in New Zealand the same animal would be milked for 17 litres.

Completed in November 2012, Yutian 2 is the most recent of Fonterra China's three farms. By the end of the year two more farms will be built to complete the Yutian "hub" - five facilities that will produce 150 million litres of milk each year.

Fonterra currently has 20,000 cows across its three farms in China. Each farm holds between 5000 and 6000 cattle. There are 3000 milking cows, the rest are young stock, housed in threes in oversized plastic cow kennels, ready to populate the next farms.

The first farm took four years to perfect the model that combines New Zealand genetics with US feed systems and cow cooling barns from the Middle East.

The farm has developed innovative use of effluent that is recycled into compost and used by local vegetable farmers.

"It's the best of Kiwi ingenuity and farming with the best of European and American confinement in China," says Morris.

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China's milk consumption is expected to double by 2020 and Fonterra's imports can't keep up. If you want a part of that growth it will come from the local milk supply, says Kelvin Wickham, Fonterra's managing director of China.

"Now we have [the model] right, you can cookie cut and roll it out at scale."

And that scale will be huge.

The five-farm hub model will be expanded across China. In the next 18 months five more farms will be built and by 2020 Fonterra plans for 30 Chinese farms producing 1 billion litres of milk. Fonterra New Zealand produces 15 billion litres a year.

If China's milk production continues at predicted levels that would give Fonterra a 2 per cent share of the domestic milk market.

It is a commercial enterprise but Fonterra also works with the Chinese Ministry of Agriculture to offer student scholarships, run farmer training programmes and refining veterinary science.

The three farms employee 550 Chinese.

"It is helpful for provincial and central government to demonstrate that you are bringing your expertise to the market providing employment, improving the quality of local milk and supporting the food safety goals of the government," says Wickham.

Currently, the farms sell all the milk at the gate and do not process any into Fonterra products. In a highly competitive Chinese market the product is protected from sabotage with specially leased padlocked tankers and a record-keeping system that ensures the milk's traceability.

The brand's reputation means they can charge a premium for their quality and transparency in a country paranoid about food safety.

But with China's milk consumption increasing 7 per cent annually, there are plans for China farms' milk to be turned into Fonterra products within the next two years.

"We are not building farms in China just to have a farm in China - it has to be a part of a bigger play," Morris says.

Despite New Zealand's high quality dairy reputation being grown on fertile green fields, intensive confinement farming does have a role in the future of New Zealand agriculture, she says.

"Absolutely it has its place. I think there is a place for confinement farming throughout the world, definitely."

Simon Day's travel was funded by the New Zealand China Friendship Society.

- Sunday Star Times

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