Chinese investment bringing welcome competition to NZ

New Zealand dairy farmers will welcome the arrival of two major Chinese food companies investing in the country's dairy industry, a senior industry official told Xinhua Thursday.

Willy Leferink, dairy chairperson of Federated Farmers of New Zealand, said the multi-million-dollar investments by Guangdong- based Yashili International Holdings and Inner Mongolia's Yili Industrial Group would bring welcome competition.

Both companies this week announced they had received approval from New Zealand's Overseas Investment Office (OIO), which considers all foreign investments of at least 100 million NZ dollars (84.09 million U.S. dollars).

"It will create more competition, particularly at the farm gate because they will want to buy their own milk," Leferink said in a phone interview.

Leferink, who represents about 6,500 New Zealand dairy farmers, said the competition would also be good for the farmer-owned Fonterra Cooperative Group, which has become a global concern with interests around the world, including farms and research facilities in China.

"Fonterra will have to sharpen up its act and become a better performer," he said.

"Competition is welcomed as long as the factories of Fonterra are not idle we want to keep the factories of Fonterra full as well."

Rising global demand, particularly from China, and a long- running New Zealand drought on Wednesday drove up the average price on Fonterra Cooperative Group's online auction site GlobalDairyTrade by 14 percent to a record 4,966 U.S. dollars a tonne.

"Milk products from New Zealand are very popular in China because they are deemed to be safe apparently there is value in that," said Leferink.

"There's a lot of Chinese people and they're getting wealthier and smarter and they want the best for their kids."

However, international concerns over the discovery of traces of Dicyandiamide (DCD), a pasture treatment chemical, in New Zealand dairy products in January also highlighted the fragility of the export market, he said.

"The integrity of our products is important and Fonterra was honest about it, which in the long-term is beneficial, but in the short-term probably not."

Yashili on Tuesday announced it had received OIO approval to invest 230 million NZ dollars in building a milk processing plant just south of Auckland, while Yili revealed Wednesday that the OIO had given the green light to buy New Zealand's Oceania Dairy, which has plans to build an infant formula processing plant in the South Island's Canterbury region.

Other Chinese investors in New Zealand's dairy sector include Shanghai-based Bright Dairy, which purchased a 51-percent stake in the Synlait Milk processing firm in 2010, and Shanghai Pengxin, which fought a long and bitter court battle last year to purchase 16 North Island dairy farms.

New Zealand's milk powder, butter and cheese exports in February were up 24 percent year on year to 220 million NZ dollars, according to Statistics New Zealand.

Exports of whole milk powder to China were up 80 percent in value to 106 million NZ dollars, with quantities up 99 percent.