Chinese-owned farms in Tasmania got milk for China

Mr Lu Xianfeng plans to fly fresh milk to his Chinese home city of Ningbo from Tasmania, where he owns Australia's largest dairy operation. His Moon Lake Investments has access to 25 dairy farms.
Mr Lu Xianfeng plans to fly fresh milk to his Chinese home city of Ningbo from Tasmania, where he owns Australia's largest dairy operation. His Moon Lake Investments has access to 25 dairy farms.PHOTO: BLOOMBERG

Buyer of Australia's largest dairy operation to start exporting fresh milk to Ningbo next year

CANBERRA • China's path to food security is taking a big swing to the south. In fact, 8,500km down to Tasmania, the dairy-hungry nation's latest source of fresh milk.

Starting early next year, businessman Lu Xianfeng, 46, plans to begin flying fresh milk to his home city of Ningbo, in eastern China, from the island state where he owns Australia's largest dairy operation.

Mr Lu's Moon Lake Investments bought the 191-year-old Van Diemen's Land for A$280 million (S$299 million) in March, giving him access to 25 dairy farms and enough milk to fill an Olympic-size swimming pool every nine days.

Part of that will be flown to Ningbo each week, Moon Lake's managing director Sean Shwe said yesterday in the Tasmanian capital Hobart, the departure point for the China-bound bulk deliveries.

The milk exports will be a boost for Tasmania, Australia's smallest and least-populated state, where the jobless rate is 6.5 per cent, higher than the national rate of 5.6 per cent.

The volume of milk shipments to the world's most populous nation has soared by an average of 126 per cent a year since 2010, creating a US$333 million (S$462 million) market dominated by the European Union, Chinese data shows.

"Tasmania is now a destination investors want to be a part of," state Premier Will Hodgman said yesterday. "We have some of the best and finest produce in the world that growing, massive markets like China want to get more of."

China's dairy farms are mostly in areas where the climate is more suitable for raising cattle, the US Department of Agriculture (USDA) said in a report in May.

Weak cold chain logistics have made it hard to ensure the milk's freshness when it reaches major markets in China, it said.

On top of that, the discovery of contaminants from melamine to mercury has made Chinese consumers wary of the local product. They see imported milk as a safer alternative, the USDA added.

After Germany, Australia is China's biggest supplier of liquid milk, including UHT products, shipping 61,184 tonnes of the product, worth A$62 million, last year, Chinese Customs data shows.

Moon Lake has already forward- sold more than 15 million yuan (S$3 million) of milk from its Van Diemen's Land dairies, which it calls VDL Farms. About 10 million litres of milk a year from VDL dairies will be trucked to Hobart for processing by Lion Dairy and packaged under the "VAN Milk" brand, Mr Shwe said in a statement. There are also plans to add yogurt and other dairy products, Moon Lake said.

It said it plans to increase milk production at VDL Farms by 80 per cent within five years. VDL now produces 7.66 million kg of milk solids a year.

Moon Lake is in advanced talks with airlines and airports to begin weekly round trips from Hobart to Ningbo starting in the first quarter of next year, with a view to increasing the frequency in a year, and adding Beijing as a destination, it said.

The new air freight route will mark the return of international departures from Hobart International Airport after a regular passenger service to Christchurch, New Zealand, was cancelled in the 1980s.

Once VAN Milk is established in Ningbo and Beijing, Moon Lake wants to take it to Shanghai, Hangzhou and other Chinese cities.

VAN Milk will represent the first sale to China of Tasmanian milk by a wholly owned Chinese company. Mr Michael Harvey, a senior dairy analyst with Rabobank International in Melbourne, said milk from Down Under "is held in high regard" in China.

Still, selling milk to China is not without risks. Earlier this year, Chinese regulators told Australia Dairy Farmers Group that it needed to revalidate its product shelf-life and supply-chain processes, effectively freezing sales there for at least two months, chairman Michael Hackett said.

"They're not bad margins, but there's a lot of extra work involved to get them."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 27, 2016, with the headline 'Chinese-owned farms in Tasmania got milk for China'. Print Edition | Subscribe