Fonterra in Chinese milk powder deal

Fonterra has scored the first big windfall from the Government’s free-trade pact with China, signing a deal worth more than NZ$300 million (€146m).

While details are still limited, the company says it involves a contract to supply “a major multinational customer” with nutritional milk powders.

The deal is further good news for dairy farmers, with the co-operative expected to lift its payout forecast for this season.

Fonterra’s Japan-based general manager of trade for Asia, Philip Turner, unveiled the deal during an appearance before Parliament’s foreign affairs, defence and trade select committee.

The committee was hearing submissions on the New Zealand-China free-trade agreement (FTA) before a party vote to ratify enabling legislation. Turner says the “commercially very valuable” deal came within weeks of the signing of the agreement in early April, locking in a schedule for eliminating tariffs on nearly all exports to China by 2019. Tariffs on nutritional milk powders for infant formula, pregnant mothers and young children are to be eliminated by 2012.

China is New Zealand’s fourth-largest export market for dairy products, earning $523m (€255m) last year, up from $144m (€70m) in 2001. The phase-out of tariffs on all dairy products over the next five to 12 years will save Fonterra $56m (€27m) on current export values.