New Zealand dairy giant Fonterra has signed an agreement with the Government of Yutian County in China for the purchase of two dairy farm sites.

The agreement formalises the final stage of due diligence on the potential Fonterra sites, the firm said today (17 September).

“This agreement is a positive step in the negotiation process with Yutian County,” said Fonterra China managing director Philip Turner. “We’ve always said that we believe the bulk of China’s growing demand for dairy will be met by locally produced milk.”

Turner said the firm’s first farming operation in China, Tangshan Fonterra Farm, established in Hebei Province in 2007, has succeeded in producing “high quality milk at good volumes, profitably”.

“By investing in two further farms, we are building on our commitment to build a safe, secure and sustainable milk supply for our customers in China,” Turner added. “We are pleased with today’s agreement and the progress to date but there are still some critical issues to be resolved by Yutian County before we can finalise any transaction.”

Yutian County is located around 115km from Tangshan Fonterra Farm, which was established as a pilot project to test Fonterra’s ability to produce New Zealand standard milk in China. The farm produced around 25m litres of milk last financial yea