Big dairy deal fillip for south

Southland's economy is set to get a major boost from a multimillion-dollar dairy deal.

Fonterra yesterday announced a major partnership with a Chinese company and investment to boost its production capacity in New Zealand, collectively worth nearly $1.2 billion.

The spinoff for Southland is that an additional three plants will be built at Edendale and there will be 25 new jobs as Fonterra expands its milk processing capacity in the South Island to help meet global demand for dairy products.

Fonterra managing director of global operations Robert Spurway said the announcement was an exciting day for Southland.

Southland was one of the strongest growing regions in the country for dairy and this was an opportunity to increase capacity and flexibility, he said.

The start date for the $157 million investment is scheduled for next month with the ambitious goal of being operational by the beginning of next year's dairy season, he said.

The development was likely to create about 100 jobs during the construction phase and 25 permanent jobs upon completion, he said.

Southland Chamber of Commerce chief executive Sarah Hannan said it was excellent news for the Southland economy.

"The investment will bring employment opportunities in the construction phase and on site at Edendale. Local business will welcome this announcement and it signals a strong commitment by Fonterra to dairying in Southland."

Southland dairy farmers echoed these statements.

Edendale farmer Matthew Richards said: "For me it's great news because it shows that Fonterra's looking to invest money down here. There will be flow on effects for everyone."

Federated Farmers Southland president Russell MacPherson said the proposal showed there was huge confidence in the Southland dairy market.

There was so much potential for further expansion in Southland, and developments in science and technology meant it was being done in more environmentally friendly ways, he said.

Nationally Fonterra is spending $555m and that includes a new milk powder drier in the North Island and the investment in the South Island to increase processing capacity to meet global demand for dairy products.

Approval has been given to build a dryer at the Lichfield site in South Waikato that will be capable of processing up to 4.4 million litres a day, similar in size to the world's largest dryer at Darfield in Canterbury.

Fonterra plans to form a global partnership with Chinese infant-food manufacturer Beingmate that will help meet China's growing demand for infant formula.

Fonterra chief executive Theo Spierings said: "Our strategy is to increase earnings by driving more milk volume into higher-value categories globally by turning the wheel from commodities to higher-margin products.

"By creating more options for our New Zealand operations we are better placed to be able to make the product mix that delivers the greatest returns to our farmers and meet the needs of our consumers and customers worldwide."

The dairy giant has maintained its farmgate milk price forecast for this season at $6 a kilogram of milksolids.

Fonterra chairman John Wilson said the decision to maintain the payout forecast reflected the longer-term outlook for international dairy prices.

"Current market views, supported by our own forecasting, indicate commodity prices improving later this year or in early 2015, with global demand for dairy continuing to grow year on year," he said.

The Southland Times