China completes purchase of NZ dairy

Published 24 July 19

Last week, the sale of New Zealand’s Westland Dairy to Yili, the part-state-owned Chinese dairy giant, was completed for a sum of NZ $588 million. This sale represents Yili’s second venture into New Zealand, with the company purchasing Oceania Dairy for NZ $650 million in 2013 as part of its ongoing global expansion plans.

China is the main destination for New Zealand’s dairy exports. Their liquid milk exports to China rose 11% last year off the back of increased demand. Much of China’s import demand for milk powder, cheese, liquid milk and butter is met by New Zealand. With Chinese milk production struggling to keep up with demand, the idea of China securing a portion of the NZ dairy industry appears sensible. However, demand for dairy imports still remains present, if now at a lesser rate.

One advantage of Yili’s investment is that the company owns a large portion of the supply chain into China, enabling a potentially better income for Westland farmers as product costs can be kept in-house. Westland farmers had previously been receiving a below-market price for their milk, however Yili has promised to match Fonterra’s price for a minimum of ten years.

China’s decision to purchase a primary link in its supply chain will help secure a portion of its milk supply as dairy demand in the country continues to rise. It will also help to alleviate some of the current challenges in the country from African Swine Fever and the on-going trade war with America.

With Brexit fast approaching, global opportunities for trade are to be explored now more than ever. Last year, the UK obtained a major trade deal for dairy products with China. This can act as an opportunity to further our exports with China’s demand expected to rise.

 Alex Cook