Infant formula market | Chinese demand for quality dairy products was up 70 percent in the first half of the year
SYDNEY, Australia (Reuters) — Mining billionaire Gina Rinehart plans to invest $494 million and partner with a major Chinese firm to create one of Australia’s biggest dairy farms.
The goal is to capitalize on rapidly growing demand in China for premium infant formula.
The joint venture, Hope Dairies Ltd., aims to begin exports in the second half of 2016 and may produce as much as 30,000 tonnes of formula a year. It also plans to sell long-life milk.
Food safety scandals have led to booming demand for quality infant formula in China, prompting a wave of partnerships between foreign and Chinese dairy firms, including an investment last month by France’s Danone SA in formula maker Yashili International Holdings.
Rinehart’s firm, Hancock Prospecting, is looking to buy 12,355 acres of farmland in Queensland, which would be home to 16,000 cows.
“There’s a huge market for dairy products in China and Australia produces the best, and we are going to produce a premium product that particularly China, we believe, will be very interested in,” said Jason Morrison, spokesperson for Hope Dairies.
China’s imports of milk and milk powder soared 70 percent in the first half of the year to 830,000 tonnes, customs data showed. Infant milk formula sales in China are forecast to double from last year to more than $31 billion by 2017, according to research firm Euromonitor.
The Chinese partner is believed to be industrial giant China National Machinery Industry Corp.
Morrison said Hope Dairies plans to manufacture pharmaceutical grade product, which would spare it from safety concerns that have hit companies such as New Zealand dairy giant Fonterra, whose then-partner in China in 2008 was found to have added melamine to bulk up infant formula.
The Queensland Dairyfarmers’ Organization, which has been working with Rinehart’s firm and the state government for months, said the project would include big in-vestments in farms and milk processing facilities in a state where dairy farmers have been hit by a local price war.