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Fonterra is continuing its expansion in China with the purchase of two more big dairy farms in Hebei Province.
The two farms, about 120km east of Beijing on a 80ha double site, will each house about 3350 cows and collectively produce up to 65 million litres of milk annually once fully operational.
It had been the dairy co-operative's intention to build a hub of dairy farms in Hebei Province and the acquisition would complete that hub.
The investment was part of Fonterra's strategy to build an integrated local milk pool in China, Fonterra Greater China and India president Kelvin Wickham said in a statement.
Demand for dairy in China was expected to double by 2020.
Much of that growth would be met from local production.
Once fully operational, the Hebei Province hub was expected to produce about 150 million litres a year.
Construction will begin next month. The opening is expected next October. The double site would operate as two farms with separate 50-bail parallel milking parlours and cow barns.
Common facilities, such as workshops, feed-mixing areas, effluent treatment and staff accommodation, would be shared to maximise the efficiency of the operation.
The herd for the two farms would be made up of Chinese-born cows bred on Fonterra's other farms and supplemented by about 4300 cows shipped from New Zealand.
The farming and animal husbandry skills developed on Fonterra's existing farms would be used to make up the 175-strong workforce, Fonterra China Farms general manager Nicola Morris said.
Fonterra intended to develop several more hubs through China, with the goal of producing up to one billion litres of milk by 2020.
Despite a 6% increase in China's milk production expected next year, a recent report from the United States Department of Agriculture said China's imports of both skim milk powder and whole milk powder were also expected to grow from last year's levels.
The USDA expected this year's New Zealand milk production to decline - but less than 1% - from last year's record level, Prof William Bailey, of the WesternIllinois University's department of agriculture, said.
Since the majority of this season's anticipated "decline" was an expectation of a return to normal weather and resulting average pasture growth, a summer similar to last year's could easily push production up to another record, he said.