13 Sep 2012

Great potential seen in Russian dairy industry

6:46 am on 13 September 2012

Fonterra director Malcolm Bailey says Russia has great potential for growth in the dairy industry, but Fonterra won't consider investing there until a trade deal gets off the table.

The Government wants a trade deal with the Russia-Belarus-Kazakhstan Customs Union in place by the end of the year.

Prime Minister John Key was unable to get a free-trade deal with Russia over the line at the Asia Pacific Economic Cooperation leaders meeting last week, but may still do so next year.

Mr Bailey said the New Zealand dairy industry wants to pursue trade agreements when there's a good quality outcome.

He said Fonterra's current sales to Russia from New Zealand are $US120+ million, mainly butter but some cheese as well.

Mr Bailey said there is the potential for that to grow because Russia is a country of great potential and its own dairy production has declined a lot from when the Soviet Union ended.

He said there's the potential to participate in the growth of Russia's output over time.

"But we've been very consistent in our messaging to the Russian dairy sector that we will not look to invest in Russia until we have a free trade framework under which to invest."

Mr Bailey said potential investment in Russia would be similar to its investments in China.

Fonterra has established two farms in China and has three more under construction.