KEY POINTS:
Fonterra plans to send a team to the Philippines to study prospects for building a milk-processing plant in the country, says Filipino Agriculture Secretary Arthur Yap.
Yap, who met Fonterra executives a few days ago, said in Manila that Fonterra might invest in the project if the Philippines was able to increase supplies from its domestic dairy herd and raise milk production capacity.
Fonterra chairman Henry van der Heyden said he was unable to comment.
But he said Fonterra had a policy of looking for opportunities to use the expertise of the New Zealand industry and continue expanding globally.
Agriculture Under-Secretary Berna Puyat said Fonterra, accounting for about 40 per cent of international trade in dairy products, planned to review the model adopted by a Filipino farmer who succeeded in raising cattle in Laguna and Quezon provinces in Luzon at lower cost.
If Fonterra could replicate this, Puyat said, "that would bring down their cost".
The Philippines aims to boost investment in agriculture, which accounted for a fifth of the US$117 billion economy in 2006 and employs one in three workers.
New Zealand cow milk production is forecast to rise 1 per cent to a record 15.4 million tonnes this year as herds increase, dwarfing Philippine output of 15,000 tonnes.
Fonterra expects milk supply to stay tight next year and into 2009 because of drought in Australia, reduced subsidies to farmers in the European Union and increasing demand in the US, chief executive Andrew Ferrier has said.
The company, which sells yoghurt, cheese, and snack foods in 140 countries, expects to pay farmers a record $5.53 for every kilogram of milk solids supplied in the year to next May.
-BLOOMBERG
