“Because of Fonterra’s dominance in the New Zealand market, the price it pays its farmers for milk at the farm gate effectively becomes the default price that all dairy processors must pay to attract supply from farmers,” said Mr Carter.

“The Dairy Industry Restructuring Amendment Bill will oversee how Fonterra sets the price it pays its farmers, thereby ensuring a competitive and innovative dairy industry.

“The proposed regime will give confidence that the aim of the Dairy Industry Restructuring Act – to drive efficiency in the dairy industry through contestable milk supply – is being met.”

Mr Carter said the Bill will primarily embed Fonterra’s current milk price governance amendments in legislation, require Fonterra to publicly disclose information on its milk price setting and introduce an annual milk price monitoring regime to be undertaken by the Commerce Commission.

The Bill also includes changes that enable Fonterra to move to its proposed Trading Among Farmers (TAF) system, should it choose to.

Mr Carter said potential changes to the Raw Milk Regulations are still being considered and an announcement on these is expected shortly.

The 40-hectare farm is expected to increase Fonterra’s overall milk production in China to around 90 million litres or 360 million cups of fresh milk every year.

Philip Turner, President of Fonterra China, said the demand for milk in China is expected to triple over the next ten years, and much of this demand is for liquid and fresh milk products. Fonterra’s future in China is underpinned by its ability to grow high-quality local milk production for its customers and by playing a strong role in the development of the local dairy industry.

Peter Moore, Chief Operating Officer of Fonterra International Farming Ventures commented that Fonterra’s pilot farm project, established in Hangu in 2007, demonstrated the kiwi dairy giant can successfully produce high quality local milk profitably.

The construction of its second farm in Yutian County is also progressing well. Tuesday’s announcement of Fonterra’s third farm investment agreement is the next step in its plans to build a hub of farms in Hebei Province in the next five years, said Moore.

Mr Moore added Fonterra appreciated the support it had received from the local government of Yutian County and Tangshan City for these developments.

Ji Xinglong, County Mayor Yutian County said Fonterra’s two farms in the region are helping to further build Yutian’s reputation as a key national agriculture demonstration zone. The company welcomes the investment in the area and will support them in any way it can to ensure they have the right environment for their operations, said Xinglong.

The new free stall dairy farm, Fonterra Yutian Farm Two, will be developed on 611 mu of land (40.75 hectares) in Yutian County of Tangshan City, which is within 130 km of Fonterra’s existing farm in Hangu and within 9km of the first farm in Yutian County.

Drawing on a similar design to Fonterra Yutian Farm, the new farm will house around 3,200 milking cows, which are expected to produce around 28 million litres of milk per year. Farm construction will start in November 2011 and is expected to be completed by late 2012.

Natural Dairy told the Hong Kong Stock Exchange that it sold 100,000 cans of colostrums formula at a profit through its Chinese subsidiary, Jiang Xi Guo Yuan (Natural Dairy), and has received 11.6 million packs of ultra-heat treated milk from UBNZ Funds Management, indicated the Herald report.

The delivery is the first since it entered into an agreement with the company formerly fronted by bankrupt businesswoman May Wang last year. Natural Dairy paid some $28 million up front, and expects to get another 6 million packets this month, with the remaining 13 million set to arrive on time, said the report.

Delivery was pushed out while UBNZ was registered by the New Zealand Food Safety Authority. Its New Zealand Dairy Processing unit has since been registered as an approved dairy exporter.

According to the Herald, UBNZ bought a dairy processing facility in Tauranga last year as part of its failed bid to buy the Crafar family farms and create a new vertically-integrated dairy manufacturer and exporter.

It’s affiliated, UBNZ Asset Holdings, agreed to buy the farms in a deal that was to transfer ownership to Natural Dairy, but was ultimately blocked by the Overseas Investment Office. The two companies changed strategy to focus on processing milk for sale in China, and they reached an initial agreement for Natural Dairy to buy 150 million packs for some $105 million, said the Herald.

That’s since increased to 450 million packs at 70 cents apiece, and the parties pushed out their agreement for a further three years, according to Natural Dairy’s statement. After failing to acquire local farms, UBNZ was forced to buy milk from Fonterra Cooperative Group under the Dairy Industry Restructuring (Raw Milk) Regulations.

Fonterra wasn’t immediately available to comment on whether it was still supplying UBNZ with milk.

According to the Herald, UBNZ is now a substantial shareholder in Natural Dairy, with a 17.18% stake, after converting bonds into equity last year. Ownership of the UBNZ group of companies changed hands to NZ Dairy Trustee from UBNZ Trustee on December 23.

Dairy Trustee is owned by Malia-i-makalata Po’uhila, Linling Xie, and Murray Hunter in three equal share parcels, according to Companies Office documents.

The new contract marks the continuation of a long-standing relationship with Futurestep and Fonterra. For six years Futurestep has partnered with Fonterra to leverage the talent acquisition capability needed to manage the company’s evolving needs.

Katrina Ritchie of Fonterra said that while Fonterra’s talent acquisition needs are constantly evolving, Futurestep’s consistent, effective and transparent recruitment process provides Fonterra with the flexibility and responsiveness to address those needs. Ritchie added that it is a strategic advantage that has served Fonterra well since the initial RPO implementation and is one that will continue to deliver benefits well into the future.

Under the agreement, Futurestep will provide strategic sourcing for permanent and fixed term roles to up to the level of mid-senior management. Delivering services in New Zealand and Australia, Futurestep is expecting to hire over 2,000 placements per year. Services cover all critical elements of Fonterra’s recruiting effort, including: internal candidate management, project recruitment, graduate and employee referral program management, as well as management of its recruiting technology.

Futurestep CEO Byrne Mulrooney said the ability to attract, deploy, develop and reward the right talent is critical in today’s global marketplace. Mulrooney reiterated that as an industry leader and a co-operative owned by New Zealand farmers, Fonterra understands that success relies on the skills, passion and experience of its 17,000 employees who work across a broad spectrum of roles around the world.

Fonterra is a global leader in dairy nutrition – the preferred supplier of dairy ingredients to many of the world’s leading food companies. Fonterra is also a market leader with its own consumer dairy brands in Australia/New Zealand, Asia/Africa, Middle East and Latin America. The farmer-owned New Zealand co-operative is the largest processor of milk in the world, producing more than two million tons of dairy ingredients, value added dairy ingredients, specialty ingredients and consumer products every year.

Futurestep is a Korn/Ferry Company and a leading global talent acquisition solutions provider, helping companies build and implement strategies for improving their talent acquisition operations. Korn/Ferry International, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions.

The acquisition offer kicked up a storm of controversy, raising concerns over increasing foreign ownership of Kiwi land and agricultural assets. The Shanghai based Pengxin International Group announced in January it was the preferred bidder for the farms, after the government turned down Natural Diary NZ’s bid to buy the properties.

Speaking to the Herald in January, Jiang Zhaobai, Pengxin International Group chairman said the Shanghai firm expected to lodge its application with the Overseas Investment Office (OIO) before the end of March. However, that has now changed, with plans shifted to early next month, said the Herald.

According to the Herald, a spokesperson for the fresh Chinese bidder said there was nothing significant behind the revised timing, other than the fact “these things always seem to take a bit longer”. The company said it would not be appropriate for it to release details of its bid until it had been lodged.

The Overseas Investment Office aims to make decisions on high quality, straightforward applications within 50 working days of registration. The Crafar farms went into receivership more than a year ago. It owed about $200 million to PGG Wrightson and the banks.

The farms in the Waikato, King Country, Bay of Plenty, Wanganui, Taranaki and Rangitikei were valued at $206.9 million before they were taken over by receiver KordaMentha who had in May last year signed a sale agreement with UBNZ Funds Management, conditional on OIO consent. The OIO rejected the bid however.

Natural Dairy wanted to buy the 16 Crafar farms for $200 million but its offer was turned down by the Government because its directors and front woman May Wang failed a “good character” test. Natural Dairy had launched a joint bid with UBNZ.

The OIO said it considered the UBNZ group of companies – including UBNZ Trustee and UBNZ Funds Management – to be associates of Natural Dairy, so approval was needed before they could buy the farms.

Oceania Dairy Ltd has been keen on establishing its own milk processing plant near Waimate, a project that has been ongoing for two years now. While it has not yet started construction of the plant it has resource consents in place and an agreement to purchase land. However, Oceania has received strong support from local dairy farmers. The firm owns a large block of milk supply from over 30 dairy farms for the coming dairy season.

This milk is from farmers with contracts to supply Fonterra and nearby milk processor New Zealand Dairies at Studholme. Synlait Milk, a partnership between Synlait Ltd and Bright Dairies of China, is currently building a new milk processing plant near Dunsandel that will extend peak processing capacity to over three million litres per day, more than doubling current capacity.

John Penno, Synlait chief executive officer said the deal is significant as it will enable the firm manage its growth, giving an immediate block of milk from a new area which can be easily transported to Dunsandel for processing. The investment has as well opened future opportunity for Synlait to establish processing in South Canterbury.

The acting chief executive of Oceania, Paul Park, said that while disappointed the transaction would mean Oceania would not be building its own stand alone operation as planned, Oceania was highly supportive of Synlait’s strategy to provide choice to farmers and create a strong alternative processing option in the region.

Synlait Milk converts more than 300 million litres of milk a year into a variety of milk powder products and high-value functional ingredients for export to the world’s leading functional food manufacturers.

Synlait Milk is a New Zealand dairy ingredients company that manufactures raw milk into milk powder and AMF as ingredients for dairy consumer companies or repacking under customer brands. Synlait Milk plans to expand its specialized milk powder production facilities in the next eighteen months with a new specialized, formulated milk processing plant to fulfill the next stage of its growth strategy.

The dairy property is in West Otago – approximately 100km west of Dunedin – and the Fund is the sole, 100% purchaser. FarmRight is an independent dairy-farming management and consultancy company with offices in Lumsden, Lincoln and Otorohanga. FarmRight’s portfolio contains 42 dairy farms covering more than 12,000ha and 34,000 cows.

The Superannuation fund’s General Manager, Investments, Matt Whineray, said that FarmRight had been appointed as a manager under the Rural Land Strategy because of its experience, track record; and its strengths in risk management and in adding investment value through making operational improvements to dairy farms.

Mr. Whineray added that FarmRight had been appointed after an extensive due diligence process, which included assessments of their ability to manage, among other things, profitable pasture-based farming systems, costs, health and safety, animal welfare, environmental compliance, and financial budgeting and reporting to the standard the Fund requires.

The Chief Executive Officer of FarmRight, Jim Lee, noted that the Funds’ long-term investment approach is well suited to dairy farming and to FarmRight’s own long-term investment approach.

For FarmRight it is also particularly pleasing to be assisting a local institutional investor to purchase substantial pieces of New Zealand rural land, the returns from which will ultimately assist in meeting the future cost of New Zealand Superannuation, Mr. Lee said. FarmRight’s mandate will eventually see the Superannuation own or part-own a portfolio of New Zealand farms, as part of the globally focused Rural Land Strategy.

The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to reduce the tax burden on future New Zealand taxpayers of the cost of New Zealand superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years.

To prepare for this, the Government has made contributions to the Fund while the cost of superannuation is relatively low. The Fund will invest the money on a prudent but commercial basis and the Government will begin to make withdrawals from 2031, when the cost of superannuation has increased. As at 31 November 2010 the value of the Fund was NZ$17.4 billion.

Hong Kong company Natural Dairy and its sister company, New Zealand-based UBNZ Asset Holdings, had their application declined yesterday by Cabinet ministers Maurice Williamson and Kate Wilkinson. They were acting on Overseas Investment Office recommendations. OIO approval is needed when any foreign company bids for sensitive New Zealand assets such as farmland.

The OIO said it considered the UBNZ group of companies – including UBNZ Trustee and UBNZ Funds Management – to be associates of Natural Dairy, so approval was needed before they could buy the farms. OIO manager Annelies McClure said the ministers had to be satisfied that the individuals involved in the deal were persons of “good character.”

Ms Wang, a UBNZ director and front woman for the Crafar deal, was bankrupted by the High Court at Auckland this month over a $22 million debt. The bankruptcy was another nail in the coffin for the deal. The sale and purchase transactions between Natural Dairy and UBNZ Asset Holdings, of which it owns 20 per cent, are being investigated by the Serious Fraud Office.

UBNZ Asset Holdings was going to buy the 16 farms for Natural Dairy and then the remaining 80 per cent of the company. The OIO said it believed the directors’ “good character” could be affected by the SFO investigation. Ms Wang is also facing Companies Office charges over her property company Dynasty Group, which collapsed owing investors millions.

UBNZ bought four Crafar farms this year. Those properties and the pending 16 were to be bought by Natural Dairy. The OIO will decide what will happen with those four farms, as consent for this purchase was also declined. One option is to apply to the High Court to have them sold.

It was revealed during the bankruptcy hearing for Ms Wang that the farms were receiving income from Fonterra, but had not declared the money to Inland Revenue despite claiming $24 million in GST refunds.

Its auditors raised questions about the true value of its investments in New Zealand. Hong Kong firm Morison Heng has refused to fully sign off Natural Dairy’s latest accounts, saying it is unable to give a “true and fair view” of Natural Dairy’s affairs because of a lack of “reliable financial information”.

The accounts have been announced a month late and reveal that the company, which is listed on the Hong Kong Stock Exchange, made a loss of HK$203 million ($34.12 million) for the 14 months ending in May. Its auditor says it was unable to ascertain the fair value of Natural Dairy’s New Zealand investments, so was unable to say if the accounts were “free from material misstatement”.

Natural Dairy has agreed to pay $500 million to a company associated with Auckland businesswoman May Wang if the Crafar deal goes ahead. But it is still unclear exactly how much money Natural Dairy has already given to Wang’s company, UBNZ Assets, and how much more it is likely to pay.

According to the accounts, Natural Dairy has so far given UBNZ just under $110 million, including a $50 million deposit and a $60 million loan. Only $50 million of the loan is due to be paid back if the deal falls over. But the auditors have questioned whether Natural Dairy would necessarily be able to recover that money should the deal fall through.

The Serious Fraud Office has since announced it is investigating the transactions related to the deal. Natural Dairy has told shareholders the SFO investigation does not directly relate to the company. SFO head Adam Feeley said yesterday that was “technically” correct, as the SFO tended to investigate individuals, rather than companies.

Meanwhile, the accounts show Natural Dairy is relying heavily on its foray into New Zealand to improve its fortunes. Following a reverse takeover last year by Auckland businessman Jack Chen, the company has shifted its focus from mining to food. It has told shareholders it decided to get into the dairy business after margins in its other food business dropped from 40 per cent to 2 per cent.

The University’s endowment fund attained the Overseas Investment Office’s go ahead for the acquisition of Big Sky farm. Big Sky is a 1300 ha dairy farm located near Patearoa. The acquisition comes amidst the raging debate in New Zealand over foreign land ownership in the country. Debate about overseas ownership of farmland has been heightened by a bid from Chinese-backed Natural Dairy (NZ) Holdings to buy 16 dairy farms from receivers of the Crafar Empire.

However, Natural Dairy has remained steadfast with its plans, reiterating its confidence over the deal. A Natural Dairy spokesman said the terms of its offer for the Crafar empire were way better and considerably beneficial to the New Zealand economy in terms of the tax take and the employment opportunities it stand to create compared to what Harvard University has offered in its deal.

Reiterating that the firm is not getting any different treatment from the country’s Overseas Investment Office, the spokesman added that New Zealander’s simply view the Chinese investment in a different light to the American investment. However, some proponents of the Natural Dairy bid for Crafar have argued the Overseas Investment Office is deliberately sidelining the Chinese offer, given its approval of the American offer for Big Sky dairy farm.

Other than this latest investment triumph in New Zealand amidst the farm land foreign ownership debate, Harvard owns another Maniototo dairy farm, Helenslea, as well as forestry interests in the North Island. Blue Sky changed its name to Dairy Farms Partnership and will continue as usual with no job losses.

New Zealand’s Finance Minister, Bill English, last week said new rules on overseas investment increased ministerial flexibility to consider a wide range of issues when assessing overseas investments in sensitive land. He reiterated that the measures provided extra clarity and certainty for potential investors and the Overseas Investment Office. The new regulations are expected to take effect during December. The Big Sky property grazes about 3300 cows and is one of the New Zealand’s largest dairy farms.