ONE of China’s biggest milk companies is buying up dairy farms in Australia, convinced it can generate higher milk production and bigger profits here than most local dairy farmers are achieving.
The Ningbo Dairy Group says that to produce as much fresh milk as it would like to fly to China from its Victorian farms, profitably and rapidly, it needs to bring in Chinese employees, fast-track construction of a new milk processing plant and cut through government red tape.
Ningbo Dairy, which runs 20,000 cows on 30 farms in China’s coastal Zhejiang province, south of Shanghai, has already spent more than $15 million buying and improving three farms in Victoria’s verdant South Gippsland region. It has further well-advanced plans — and cash — to buy more farms in Gippsland and northern NSW, to increase its herd from 550 to 2500 cows and to build its own $6 million fresh milk processing plant on its 280ha Glenview Farm at Kernot.
Ningbo Dairy vice-president Harry Wang said the key to its profitable Australian dairy investment lay in vertically integrating the group’s Australian operations, with it owning and controlling all parts of the supply chain.
Inspecting Ningbo Dairy’s cluster of farms near Phillip Island yesterday with his uncle and company owner Yin Chong Zhang, Mr Wang said the target was to own enough farms, superior cows and processing facilities to produce and fly 100,000 litres of fresh milk a day direct from Melbourne and Sydney to China.
Mr Wang said Australian dairy products were well-known by consumers in China for being high-quality and safe. The small amount of Australian fresh milk currently being flown in by plane by NSW co-operative Norco is being snapped up for an astounding $10 a litre.
With fresh milk processed by Ningbo Dairy in its Chinese dairies selling for a maximum price of $2 a litre, Mr Wang says the company unashamedly sees Australian dairy farming and milk processing with the focus on exports to China as the place to be.
“We also think there is room for big production increases (in the industry) here; our cows produce 9000 litres of milk a year in China but here in Australia the average is 6000 litres,” Mr Zhang said.
“There is huge potential in Australia because there is land here that can run dairy cows while in China there are few farms left for expansion. Australia and New Zealand are the best countries in the world for dairying and that is why I expect more Chinese like us will come here.”
Mr Zhang said positives about Australia were the availability of cheap high-rainfall land suited to dairying and the superior genetics of its cows. Ningbo Dairy exported 1200 of its best young heifers last year to its Chinese operations.
The downside of Australian dairying to the Chinese newcomers is the low milk price paid by Australian processors to farmers, high labour costs, excessive red tape, a slowness to innovate and the lack of good young workers.
Mr Wang said Ningbo Dairy, trading in Australia as YoYou Dairy, had already increased production significantly in 18 months on its previously rundown Gippsland farms by investing in pasture improvements and buying top-quality cows.
Future innovations being adapted from China will include more crop production such as growing maize to feed cattle, with the milking cows likely to be kept in barns rather than grazing paddocks for much of winter and spring.
As local workers are hard to come by and expensive, Mr Zhang is keen to bring some of his 2000 employees from China to Australia to milk cows and help lift farm production levels to Chinese standards.
“The milk price paid here to farmers – less than 50 cents a litre – is a joke and so is the fact that you buy milk in a shop here for $1 a litre,” Mr Wang said.
“With labour so expensive — three times more than in China — and milk cheaper, it makes profitable farming very hard; we see the only way is to process the milk ourselves, export it to China and to bring some of our workers here,” Mr Wang said.
“We are ready to buy more farms and build our factory as soon as possible; the only thing that will slow us down is if the milk price paid here stays low and we continue to have problems finding enough good managers and young employees keen to work hard.”