Southern Pastures and Westland Milk Products have signed a letter of intent for the 2018-2019 period outlining the formation of a 50:50 joint venture (JV) and the transfer of shares.

The JV will focus on creating free-range milk products obtained from grass-fed cows.

New Zealand based institutional dairy farmland fund Southern Pastures also plans to transfer four million kilograms of milk solids to Westland annually.

“We don’t see any conflict between promoting sustainability and maximising economic returns.”

Southern Pastures executive chairman Prem Maan said: “Here is an opportunity for us to put into practice what we’ve been promoting, premium products made sustainably.

“We believe discerning consumers will pay a premium for high-quality, healthy, traceable products. Our advisers have calculated that our move will add to the Westland pay-out from the very first season, providing a real economic fillip to the region.

“We also see real strength in the common bond of farmers and, as such, we’re committed to the cooperative model. That makes Westland a natural business partner for us.”

The JV will use milk from farms in Canterbury, New Zealand, and process it in Southern Pasture’s Lewis Road Creamery.

Last October, Southern Pastures acquired a 25% share in Lewis Road Creamery and pledged to provide a long-term support.

Maan further added: “From day one, Southern Pastures has had a firm conviction about the potential of premium dairy products from New Zealand’s free-range, grass-fed dairy farming systems.

“While our commitment to protect, nurture and improve our environment is at the core of our practice, we don’t see any conflict between promoting sustainability and maximising economic returns.”