KEY POINTS:
When talking about Fonterra's overseas expansion, most newspaper inches are devoted to China and South America - a developing world where New Zealand's professional farming polish can work up a good profitable shine.
And yet the richest and most developed nation on the planet might hold some of
the biggest opportunities - welcome to America.
Fonterra USA's Waiuku born and bred president Martin Bates says the division is involved in partnerships and activities generating turnover of US$2.5 billion ($3.2 billion) a year and probably contributes revenue of US$1.3 billion to the group result.
"I can easily see that we can double that business in three to five years," Bates says. "And the biggest opportunity is not the import side of things, it's working in the US and leveraging our technologies and those things in there."
Fonterra will officially open its new North American headquarters and a development centre in Chicago later this month.
Fonterra USA has five core parts - importing commodities such as casein and milk proteins, value add ingredients for product functional and nutritional attributes, exports, a small brands business and a joint venture with co-operative Dairy Farmers of America called DairiConcepts which is mainly domestic focussed with manufacturing of milk proteins and cheese powders.
The company has a marketing relationship with Dairy America - an association of nine producer-owned dairy co-operatives - to supply skimmed milk powder to the global traded market.
The development centre has been moved from a smaller operation located in Mexico and is an extension of the research and development undertaken in Palmerston North.
Fonterra works with customers who could be making products including cheese or yoghurt on areas such as reducing formulation costs, nutritional claims or probiotics.
The cultured products category in the US is quite small and there is a big gap in comparison to the yoghurt market in Europe, while the customers are after pretty much the same thing - more health and nutrition, he says.
"So in the next 10 years there's going to be a huge amount more yoghurt consumed in the US."
Cheese demand is expected to grow by 2-3 per cent a year and is already the equivalent of five times what the total New Zealand milk production could produce if it were all used for making cheese.
"Man there's huge opportunities in that area," Bates says.
For Fonterra this mean supplying milk proteins to add attributes such as reduced production time, improved quality and consistency.
INVESTMENT BOOM
The New York Times reports that private investors are moving beyond financial markets and heading for commodities including wheat, corn and soybeans - which have attracted hundreds of billions of dollars - and are getting dirt under their fingernails.
A longer-term investment view based on a growing global demand for food looks like a pretty safe bet right now and some big investors have decided on purchases including farmland, fertiliser, grain elevators and shipping equipment.
Three institutional investors, including the large New York BlackRock fund group, have plans to spend hundreds of millions of dollars from sub-Saharan Africa to England and mainly on land.
The new moves could boost food production, with investors planning to consolidate small plots of land, introduce new technology and supply funds for modernisation, the New York Times says.
UK-based Emergent Asset Management is raising up to US$750 million for farmland in sub-Saharan Africa.
Jeffrey Hainline, president of commodity brokerage firm Advance Trading, is quoted as saying that direct ownership of land and other agriculture assets will free investors from rules curbing the amount of speculation in commodity markets.
There are also concerns that investors will not share the industry's commitment to farming through the highs and lows but rather will be focussed on profit first and foremost, the newspaper says.
Arguably a focus on profit is as important in bad times as in good, and if market investors bring cash with them for modernisation they will bring longer-term benefit to the economies in which they invest.
Farming can be a cyclical business but provided professional and private investors understand the nature of the industry and the risk, then the new capital will be a welcome injection.
Plus if investors choose to take the plunge outside the borders of the developed world, it will help to alleviate, at its core, the poverty and fear of food shortages so prominent in the headlines this year.
FOOD CRISIS
Minister of Agriculture Jim Anderton led a New Zealand delegation to a World Food Security conference in Rome last week
The event was hosted by the United Nations' Food and Agriculture Organisation as a chance to re-launch the fight against hunger and poverty, and boost agricultural production in developing countries. The conference was attended by about 2500 people, up to 60 heads of state or government, 127 ministers and UN Secretary-General Ban Ki-moon - who urged world leaders to suspend or eliminate many price controls and agricultural trade restrictions to cut soaring food prices.
In a speech to the conference, Anderton said New Zealand would give another $7 million to the World Food Programme appeal.
The challenge of producing 50 per cent more food by 2030 was immense and could only be achieved by a revolution in investment and research, Anderton says.
The world's population is expected to expand from 6.6 billion to 9 billion people by 2050.
"We must also dramatically scale up investments in agricultural development and social protection mechanisms to address the needs of those facing chronic and structural hunger," Anderton says.
The situation demands genuine progress in reducing market distortions in agriculture and in providing fairer trading opportunities for developing countries, Anderton says. He highlighted the changes following the removal of tariffs and subsidies in New Zealand in the 1980s and the subsequent innovation and gains in productivity, while urging a rapid conclusion to the Doha Round of global trade negotiations.
Unfortunately urgency and the will to take action often only achieve critical mass when crisis is knocking at the door. Rocketing food prices have led to unrest in countries including Egypt, Indonesia, Mozambique, Senegal and Bangladesh, while protests in Haiti saw at least five people killed and 200 injured.
Right now the most important job may be to ensure access to food but the long-term solution has to be poorer nations becoming more productive.
Trade Minister Phil Goff has said the problem at Doha has been export subsidies which wealthier countries pay to their producers meaning there is not a level playing field, which disadvantages efficient countries like New Zealand that do not rely on subsidies and developing countries in the third world.
A deal at Doha could be worth up to $900 million a year to New Zealand.
The finishing line to a global trade deal appeared closer last month, with the World Trade Organization issuing new agriculture and industrial goods proposals, only for US and European Union businesses and farmers to protest that the revised texts did not do enough to open up markets in developing countries.
In regards to Doha, someone has to break free of the quagmire and the food price crisis will likely push the spotlight towards the richer nations.
If it proves too much of a step to take there is always the option of the status quo but then riots and revolution has a way of focusing the mind.
