3 Apr 2013

Chinese firms get OIO approval for dairy plants

10:31 pm on 3 April 2013

Two Chinese-owned dairy companies have approval from the Overseas Investment Office to set up milk processing plants producing infant milk formula.

The Yashili New Zealand Dairy Company will spend more than $200 million on a milk powder plant at Pokeno, south of Auckland, producing formula exclusively for the Chinese market.

It hopes to have the plant operating in the second half of next year.

The Inner Mongolia Yili Industrial Group has approval to buy the New Zealand company Oceania Dairy.

Oceania Dairy says it expects construction on an infant milk formula processing plant at Glenavy, in South Canterbury, will begin immediately.

It says it expects the plant will be fully operational by July 2014.

Yashili International Holdings has told the Hong Kong stock market it will invest $230 million and employ about 100 staff.

Yashili New Zealand operations manager Terry Norwood says tariffs on infant formula into China have been lowered, making it economically viable to build the plant.

Mr Norwood says the facility will produce 52,000 tonnes of infant formula exclusively for the Chinese market each year.

Land in Pokeno has been purchased and now that the Overseas Investment Office has given approval Yashili will begin work on getting resource consents, building the plant and setting up systems.

Beyond that, Mr Norwood says, a supply base has to be set up for milk and other products that go into making infant formula.

He says it has yet to be decided if the plant will buy its milk from Fonterra or other suppliers.

Federated Farmers national dairy chairman Willy Leferink says farmers supplying Yashili will have to meet high safety standards.

Mr Leferink says farmers welcome the investment in the dairy industry and the boost it will give to competition.

"It gives farmers choices. If you don't want to become a shareholder in Fonterra it gives you an option to sell your supply to someone else."

Lincoln University professor of agribusiness Keith Woodford says the new business will increase competition, and keep milk prices healthy.

Dr Woodford says New Zealand formula processing industry needs the Chinese investment.