Fonterra is to develop a second dairy farm in China which will house 3000 milking cows in addition to the more than 6000 it has on an existing property.
An agreement signed this week between Fonterra and political leaders from Yutian County seals approval for the $42 million development.
Fonterra chief executive Andrew Ferrier said this gave the company a stake in China's domestic milk market.
"The fast growing demand for dairy in China will be met by locally produced milk, and we want to be working alongside the local dairy industry to help meet this demand."
He said the 2007 investment in a pilot farm at Tangshan showed Fonterra could produce high-quality milk locally for its Chinese customers and local consumers.
That farm started with 3000 cows but has grown to 6000 cows.
It produces about 25 million litres of milk a year.
The new farm will be a free-stall farm system developed on 42ha halfway between Beijing and its existing farm at Hangu, and it has access to water and locally grown corn silage for stock feed.
The new facility will have 12 barns, feed storage facilities, a milking parlour and wastewater treatment.
Mr Ferrier said the new farm would be managed under a risk management programme and audited according to Fonterra's Standards of Excellence for milk production, to ensure milk produced was safe, traceable and of high quality.
So far, milk quality met the highest New Zealand and Chinese standards, the company said.
The 3000 cows will come from New Zealand, and with construction scheduled to take a year, milking was expected to start in November next year.
Mr Ferrier said the project would employ 100 locals, most of whom would live in an onsite housing facility.
Meanwhile, powder prices eased 2.5% at this week's globalDairyTrade event, continuing the regular price fluctuations that have been a feature for the last 15 months.
The price of all four dairy products offered by Fonterra eased, pushing down the trade weighted index for the sale 2.5%, compared with the previous sale two weeks ago.
Anhydrous milk fat eased 1.2%, buttermilk powder 1.1%, skim milk powder 4.7% and whole milk powder 1.1%.
The average price over all products was $4670 a tonne.
But there was some good news, with the rate of price decline for contracts for supply of product from April to June next year much lower than for the two earlier supply periods.
