NZ's water attracts Chinese dairy investment

Chinese investment in the New Zealand dairy industry is partly about the export of water, DairyNZ chairman John Luxton says.

His comments come as the debate over such investment flares again as Chinese companies want to build two dairy factories in New Zealand, one for baby formula and the other for milk processing. The deals are worth more than $400 million combined.

The proposals need Overseas Investment Office approval, but NBR ONLINE readers have already given their verdict.

In today's print edition of the National Business Review academics are warning the consequences of New Zealand losing control of the quality of sucn an imporant commodity as milk could be "dire".

Today, Mr Luxon – a former agriculture minister – told NBR ONLINE New Zealand has huge volume of water available for agriculture, which is something China struggles with.

"In industries, particularly protein-producing industries at the upper end of the market like dairying and meat, New Zealand is an obvious choice for sourcing a lot of that production," he says.

New Zealand's total renewable water resources per capita is 36 times that of China, according to 2011 figures from the United Nations' Food and Agriculture Organisation.

Canterbury dairy processor Synlait Milk is already 51% owned by one of China's largest dairy companies, Bright Dairy.

'Dire' consequences

University of Waikato Professor Jacqueline Rowarth warns it could be "dire" if New Zealand loses control of its milk brand by having offshore companies produce dairy products and process milk powder here for export.

In the National Business Review today, Ms Rowarth describes as “idiocy” Fonterra building farms in China while Chinese companies build factories in New Zealand.

“If there’s more milk than can go into the processing plants, why isn’t Fonterra building more factories here?”

Lincoln University Professor of farm management and agribusiness Keith Woodford told NBR ONLINE New Zealand has been slow to capitalise on the processing and packaging of UHT milk in NZ for export to China to be sold in supermarkets there.

Fonterra is only starting to do this now with their brand Country Goodness, he says.

"I think it is likely that we will therefore see Chinese companies fill the gap by themselves by setting up UHT processing factories in New Zealand.

"The Chinese companies are not interested in firing a shot across the bows of Fonterra.

"They are doing what they are doing because they think they can position themselves to make future profits.

"Only time will tell whether they have got their strategy right."

dwilliams@nbr.co.nz