Eroding share of milk worries Fonterra shareholders
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
The joint venture (JV) includes exclusive supply of LIC's dairy genetics for an initial period of 10 years, through a new entity called LIC NZBrasil.
LIC chief executive Wayne McNee says the co-op began exporting genetics to Brazil in 1999, but the new JV will seek to deliver a better return to farmer shareholders in New Zealand.
"Brazil is the fifth largest dairy industry in the world, with more than 23 million dairy cows. Huge growth is expected over the next 10 years and this presents a significant opportunity for LIC, and our shareholders.
"Our objective with the joint venture is to support the growth of Brazilian dairy industry, providing high quality genetics solutions to build a sustainable business that will generate a better return for LIC in New Zealand."
Brazilian cow numbers are forecast to increase to 25 million by 2020, and annual production to surpass 38 billion litres. While the use of artificial insemination is low, around 20% of cows, it is growing, with the number of inseminations doubling since 2008.
Demand for pasture-based genetics and the progeny it delivers is also on the rise, reflecting a growing belief in the value of genetic improvement to drive productivity gains.
McNee says the JV supports LIC's goal to be $1billion revenue cooperative by 2025.
"To achieve this goal, LIC needs to grow in New Zealand and overseas. As part of this we have been working to identify key markets and businesses that align with our growth aspirations and fit with our co-op focus.
"We have identified the Brazil as a key international market that will add value for our shareholders."
Other key international markets in the co-op's sights include the United Kingdom, Ireland and China.
