Fonterra hot on UHT milk for Asia

Fonterra aims to produce 90 million litres of UHT milk a year. Photo / Bruce Jarvis

Fonterra is boosting ultra heat treated milk production in Auckland to 90 million litres a year to target Asia and the Pacific.

The farmer co-operative said it had completed an $8 million expansion and upgrade at its South Auckland UHT plant, which would increase production capacity by 30 per cent.

Fonterra Brands New Zealand managing director Peter McClure said global consumption of UHT was expected to grow at a compound annual rate of 5.2 per cent between now and 2012, making it one of the fastest growing dairy categories and a huge export opportunity.

"With this increased production capacity, we will be able to expand our presence in our existing markets of China, Singapore and Hong Kong as well as start exporting in to new markets such as Malaysia, Indonesia and Vietnam," McClure said.

The company was seizing the opportunity to increase its footprint in global markets, particularly in Asia and the Pacific, he said.

"Limited domestic dairy supply in Asian countries, growing populations and education about dairy's nutritional benefits are creating this demand."

New Zealand was seen as a source of safe food and it was an advantage to be able to get milk year round and keep supplying the market, McClure said.

"Increasing demand from Asia and the Pacific saw us more than double our production from 27 million litres in 2005 to 60 million litres last year.

"With this expansion, we will have an annual production of 90 million litres, that's more than 1.7 million one-litre retail packs of UHT a week."

UHT was giving the company a good return, McClure said.

"I remember some 14 years ago when I first joined the industry we were making losses in UHT and battling and trying to get our plant settled down," he said.

"It's a business that takes a while to build but once you get a position it can provide really good returns."

UHT did not need to be refrigerated and had a nine-month shelf life, which made it perfect to ship to countries with hot climates, McClure said.

The company was looking to develop new products such as low-fat and vitamin-enriched milks.

* Fonterra's next online auction takes place tomorrow, with agricultural market analyst Agrifax predicting prices will stabilise.

The average price of a basket of products in Fonterra's auction on September 2 increased by 16.9 per cent, having fallen by 8.3 per cent and 13.7 during the previous two months.

In a market update, The Dairy Trader and Agrifax said general demand for dairy products remained strong but the price increase at the previous auction was not expected to be repeated.

USDA World Agricultural Supply and Demand Estimates forecast US milk production would rise by 1.8 per cent in both the 2010 and 2011 dairy seasons.