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Fonterra expands Chinese operations

New Zealand dairy giant, Fonterra is expanding their dairy farm operations in China. The cooperative built its first Chinese farm in 2007, the second came on-line this week and a third is currently under construction. Speaking at the grand opening of the second facility, Fonterra CEO Theo Spierings announced they would spend another $100 million to build two more dairy farms in Hebei Province. Eventually, the five farms will create a hub of 15,000 dairy cows supplying 150 million liters of milk per year for the Beijing market. Spierings says the ultimate goal is to have 33 farms with 100,000 cows producing 1 billion liters of milk annually by 2020.

The plan is stirring some controversy at home; the cooperative is seeking to finance its global aspirations through a program which allows farmer-members to sell their dividend rights to a fund which would make them available to investors on a secondary market. The shares would be traded on the New Zealand stock exchange. The farmers would retain the voting rights. Some farmers oppose the idea of non-producers owning shares in the cooperative saying it could create a conflict between prices paid to producers and company profit.

The plan would also allow farmers to buy-and-sell shares in the cooperative among themselves rather than through the co-op.

Fonterra has 11,000 farmer shareholders with revenue of $19.9 billion last year. It is the largest dairy exporter in the world.