Military clear Fonterra plant in Sri Lanka for ministers

The official opening of an expansion to Fonterra's main dairy factory in Sri Lanka has become a high level security operation as government ministers are expected to attend.

The factory went into lockdown early today as security forces cleared the complex for the official visit by several government ministers, and the wife of a government leader.

Tonight (1930 NZ time) the company is due to open a big expansion of its yoghurt plant at Biygama, about 35km west of the Colombo city centre, in a bid to more than double production.

But company officials said security concerns because of 20 years of fighting, between the predominantly Sinhalese government and Tamil Tiger rebels seeking a homeland in the north and east, mean there will be little notice if the official guests do arrive.

All workers are leaving the site so that it can be searched, and then only people with security clearance will be re-admitted for the official opening.

The ministers - and the woman VIP expected to officially open the plant - will be surrounded by three or four rings of soldiers, police and other security staff.

These distractions aside, Fonterra's local managing director Achyut Reddy, said the 1.2 billion Sri Lankan rupees ($12.2 million) locally funded expansion was a big deal for the multinational.

Increasing the local milk supply could provide a buffer against volatile international prices for milkpowders, he said.

But the step up from producing 6.3 million cups of yoghurt a month to 10.6 million requires a big boost in local milk production in a nation where the average farmer has only two or three cows and takes his milk to a collection centre by bicycle.

The biggest of Fonterra's 3900 suppliers has about 10 cows and the biggest herd in the country - owned by a rival milk brand - numbers about 100 cows.

The company is offering farmers advice on boosting production, improving feed and animal health, and backing interest-free loans in a micro-finance scheme.

Artificial insemination of local cows with semen from Australian dairy cattle that can cope with tropical heat is also being offered to farmers.

At present Sri Lanka produces only about 200,000 litres of the nearly one billion litres of milk it consumes annually, and any increase in self-sufficiency is expected to score points for the company with the government, which has said it wants to lift local production to 50 per cent of consumption.

Relations with the Sri Lankan government are crucial to Fonterra farmers in New Zealand, who earn 94 per cent of their revenues in the country from price-controlled milkpowders.

The company not only has to make a business case to win permission to raise its prices, but has been faced with big jumps in import duties.

It is also making political points with nutrition campaigns for schoolchildren, and "nutrition camps" for parents, which include advice that growing children need two or three glasses of milk daily.

- NZPA