New Zealand-based dairy giant Fonterra Co-operative Group is planning to open its second farming hub at Ying County, Shanxi Province with five 3000-cow farms, as part of its strategy to become a more integrated dairy business in China.

The hub is expected to begin production in the second half of 2014 and is the next step in the company’s strategy to produce one billion litres of milk in China by 2020.

Fonterra’s two hubs will jointly produce up to 300 million litres of milk per year, when fully operational.

Fonterra president of Greater China and India Kelvin Wickham said that the new Ying County farm hub is a significant step forward in their strategic plans in China.

"Ying County provides an ideal environment for us to expand our farming operations due to its new agricultural zone, proximity to customers and the high quality supply of animal feed available in surrounding areas," Wickham added.

Fonterra will employ more than 500 people for the new hub preferring mostly locals.

Meanwhile, the company has extended its farmer training programme to Shanxi to support the new hub development as well as to build the capabilities of the local dairy industry.

Fonterra noted that the second hub will build on its existing investment in Hebei Province and will help it to meet customer and consumer demand for high quality fresh milk in China.

Demand for raw milk in China is increasing at about 6 to 8% over the past three years, while supply growth has been only about 2%.

Fonterra intends to tap this supply gap by increasing its domestic milk supply in China, while continuing to import its quality finished dairy products.

"We have received strong support from many levels of government in China and we are looking forward to continuing to build strong partnerships with our local communities in both Shanxi Province and Hebei Province over the coming years," Wickham concluded.