Dairy giant Fonterra is investing in two more dairy farms in China in a bid to improve the quality of the raw milk supply in the country.

Philip Turner, MD of Fonterra China, said that the move will allow the New Zealand-based dairy group to capitalise on the quickly developing Chinese dairy market as the current supply of high-quality fresh milk is unable to keep pace with demand.

“We are looking to help grow a safe, secure and sustainable milk supply in China in order to meet this demand and expand our customer base,” he said.

According to Fonterra, China is set to become the world’s largest dairy market in the next few decades and is forecast to experience double-digit annual growth over the next 10 years.

Fonterra currently operates one piolot farm in Hangu, established in 2007. Turner said that the success of the company's operations there has demonstrated that Fonterra can successfully produce “New Zealand standard milk” in China.

“We are confident that with further investment in good technology, people and high quality genetics, we can replicate this model on further farms. This will complement our New Zealand milk supply and help us better meet the needs of our key customers, who are increasingly looking for local sourcing capability.”

Fonterra has identified several possible sites for the new farms in Hebei Province and will consider partnering on the investment. However, Turner said Fonterra would want to have full management of the farms.

“It is important that we keep the next two farms in close proximity to Tangshan Fonterra Farm in order to achieve efficiencies in transport, milk supply and Fonterra management.”

The group aims to complete final long-term lease agreements by mid-2010.

Each of the new farms is planned to be of similar size to Hangu, with around 35 hectares of land and around 3300 milking cows.