Thursday, 17 February 2011 09:27

Co-op targets ‘giant’ markets

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Dairy deal: Global Dairy Health director Paresh Chaudhry (left), Fonterra chief executive Andrew Ferrier and IFFCO managing director Rakesh Kapur sign the deal on a feasibility study. Dairy deal: Global Dairy Health director Paresh Chaudhry (left), Fonterra chief executive Andrew Ferrier and IFFCO managing director Rakesh Kapur sign the deal on a feasibility study.

 

 

FONTERRA’S FORAY into the burgeoning Indian dairy market is a sign of things to come.

 

Rabobank’s new global dairy outlook describes India and China as the new giants in the market. It says dairy processors will find the opportunities presented by the rise of China and India difficult to ignore – in domestic growth and expanding trade requirements.

Fonterra is teaming up with India’s largest farmer co-op on a feasibility study of a pilot dairy farm as a first step in setting up large-scale farms in India.

The co-op has been operating a 3000-cow farm in China for three years and is investing in another Chinese farm.

With limited milk supply in New Zealand, Fonterra is turning to operating farms in India and China to cash in there on growing demand for dairy.

Fonterra hopes to have a pilot farm in India with 3000-5000 cows. Chief executive Andrew Ferrier says their approach will be similar to China.

“India is a vibrant and growing market and we’re excited by the potential there,” he says.

Fonterra’s joint venture partners are the Indian Farmers Fertiliser Cooperative (IFFCO), with 50 million members, and farm developer Global Dairy Health (GDH).

IFFCO joint managing director Rakesh Kapur is delighted to partner with a reputable dairy leader like Fonterra.

“The synergy of two large cooperatives and dairy experts will help position India as a quality milk producer,” he says.

GDH director Paresh Chaudhry says a partnership with Fonterra will complement its vision to establish state-of-the-art integrated dairy farms.

“The consortium will help bridge the vast production gap of high quality, safe milk that will provide a high-protein diet to the young and growing India.”

Rabobank senior analyst Hayley Moynihan says China and India have been the engine room for global dairy growth in recent years.

While local production in these two countries has more or less matched demand for a decade, pressures from rising feed costs, the challenge of building safe supply chains, and the sheer volume of growth required are now making achieving self sufficiency an almost herculean task, she says.

“In the wake of the melamine crisis we believe China faces a structural market deficit that will be difficult to erode in coming years, and even India is likely to call on the world market more frequently over the next three to four years.

“In terms of the general market outlook, China and India’s presence broaden our medium-term story because another source of demand has arisen for internationally traded dairy products, and that demand will be difficult to fill without a sustained period of high prices to encourage more milk contributions from higher cost regions.”

 

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