Fonterras investment in Brazil looks set to follow moves in China

Fonterra's investment in Brazil looks set to follow moves in China

Fonterra is set to develop a pilot dairy farm in Brazil to support its South American venture with Nestle, Dairy Partners Americas.

The New Zealand dairy giant has signed a deal to buy an 850 hectare farm in the Brazilian state of Goias.

The world's largest dairy exporter said it had signed a conditional agreement to buy the plot and is now conducting final diligence on the land.

Fonterra plans to develop two milking platforms, with a total herd of 3,300 cows. Milk production would begin by late 2014.

CEO Andrew Ferrier said the investment would be the first step in developing a source of "high-quality fresh milk" in Brazil to support the DPA venture.

"We have already invested through DPA in helping to improve the efficiency of dairy farming in Brazil," Ferrier said yesterday (11 May). "This pilot project will allow us to develop and test the right model for our own dairy farming operation."

He added: "Brazil is Latin America’s largest economy, with 200m people. The growing and increasingly prosperous population is driving strong demand for fresh dairy products. This demand will be met by milk produced locally."

If the pilot proved successful, Fonterra intended to develop more farms in Brazil.

The company is building a footprint in the world's emerging markets. Fonterra has already developed a dairy farm in China and is conducting a study into a potential large-scale joint venture dairy farm in India.

Fonterra established its 6,000-cow Tangshan Fonterra Farm in China in 2007 and last year announced plans to develop a second farm in Yutian County.

In India, Fonterra plans to team up with Indian farming co-op IFFCO to study plans to build a pilot dairy farm in the country.

Ferrier said global demand for dairy products was forecast to rise steadily. The Food and Agriculture Organisation of the United Nations predicts there will be an additional 2.3bn people by 2050, requiring a 70% rise in agricultural production.

"Demand for dairy around the world is growing by 2% per annum," Ferrier said.