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  • On this episode of China Uncensored,

  • we make a trip to the farm!

  • Hi, Chris Chappell here in New Zealand.

  • You might be surprised to learn that

  • the rolling hills of green behind me

  • are actually rolling hills of milk.

  • Dairy is big business here.

  • That's one reason why New Zealand

  • is buttering up to China.

  • Dairy is New Zealand's biggest export

  • and makes up about 6 billion dollars

  • of the country's GDP.

  • And since China is New Zealand's biggest trading partner,

  • a lot of that dairy ends up in China.

  • So, there's a big demand in Chinese markets

  • for New Zealand milk?

  • There is.

  • Yeah.

  • I think in the last financial year

  • that the interim results came out,

  • about a quarter of New Zealand's milk

  • goes into China.

  • Wow!

  • New Zealand Dairy farmer Chris Falconer

  • gave us a tour of his farm!

  • I should not have worn a suit.

  • Someday, you'll be a tasty steak.

  • Chinese consumers want to buy New Zealand products

  • because they trust the provenance of the raw products.

  • The milk that we produce,

  • they know that it's produced like this.

  • They know that the processing standards are very high.

  • The manufacturing standards are very high...

  • I think that they're willing to pay

  • a little bit more than they would

  • for a product from another country

  • just because of the quality standards that we have.

  • And Chris gave me a good idea

  • of just what goes into a glass of New Zealand dairy.

  • So, how often do you have to rotate the fields?

  • Basically, you understand how fast the grass is growing.

  • That dictates the speed of the rotation.

  • So, you want the grass to go from A to B

  • in the time it takes to get around the paddocks.

  • So in Spring that can be 20 days,

  • and in Winter that can be 80 days.

  • This is, by and large,

  • a pretty sustainable deal you've got here?

  • Well, yeah.

  • We don't ...

  • we operate on the basis that the land can sustain the animals...

  • So, all these cows stay grass-fed their whole lives?

  • Oh, yeah!

  • Yup.

  • They're never inside.

  • The only time they get a roof over their heads

  • is when they're a baby calf

  • and they get put in the shed to be reared.

  • When they go in to get milked,

  • there's a roof over the cowshed...

  • Do you think that affects the quality of the dairy?

  • It absolutely does.

  • Yeah.

  • So, there's been a lot of work done

  • on the contents of pasture-fed milk.

  • Again, there's all these people taking omega three pills.

  • Grass-fed beef and grass-fed milk is high in omega threes,

  • high in complex linoleic acids, high in antioxidants.

  • So, it contains a lot of those things that people

  • are supplementing themselves with... so, they-

  • I think I need to get a jar of raw milk from you before I leave.

  • I think we can organize that.

  • I think we can organize that.

  • Yeah.

  • It's that kind of quality that appeals to Chinese consumers.

  • In 2008, China was rocked by a scandal involving Sanlu

  • a Chinese dairy company that added a toxic chemical

  • called melamine to its milk powder.

  • Melamine made the milk's protein content

  • appear higher in tests.

  • But it also made more than 300,000 sick

  • and killed at least 6 babies.

  • So a lot of Chinese consumers started looking overseas

  • for dairy they could trust.

  • It's cows like these that provide China

  • with the lactose they tolerate.

  • How long has this one been around?

  • Well, I think she's about five or six years old.

  • That cow.

  • So in her life, how much milk will this cow produce?

  • She'll produce about 350 kilos of milk solids a year,

  • which is the equivalent of about 4000 liters of milk per year.

  • Wow.

  • So 4000 liters of milk is at

  • the low end of the production scale

  • in most parts of the world,

  • but it's high in fat and protein so it's got [inaudible] choice.

  • So a little less production, but higher quality.

  • Higher quality, less production,

  • and most importantly, less cost.

  • Less cost.

  • So how much will that be worth?

  • That cow?

  • Well, the cow and the liquid gold that comes ...

  • Well, she produces as I say,

  • about 350 kilos of milk solids a year

  • and they're worth six dollars a kilo,

  • so you're about 2000 dollars worth of milk.

  • And she's probably worth about 15 or 16 hundred dollars.

  • So she produces more than her value in milk every year.

  • And also manure too, right?

  • Yeah, that's just part of the recycling system that we run here.

  • So, yeah.

  • The sun provides energy here

  • and she converts the energy in her rumen into milk.

  • About how many cows do you have on the farm?

  • Roughly 500.

  • It varies from season to season, but roughly 500.

  • Chris Falconer works with

  • New Zealand's biggest dairy co-op, Fonterra.

  • Fonterra is the world's largest dairy exporter.

  • It gets its milk products from more than

  • 10,000 New Zealand dairy farmers,

  • who also own shares in the company.

  • In 2015, Fonterra invested in

  • a Chinese company called BeingMate.

  • This is their logo,

  • so you know I'm not making that name up.

  • Fonterra paid nearly half a billion dollars

  • for an 18 percent stake.

  • But BeingMate was run...badly.

  • Beingmate's share price has dropped dramatically

  • since July 2017.

  • And that means Fonterra has lost big.

  • So, how do you feel about Fonterra's investment

  • with the Chinese company Beingmate?

  • Well not tremendously happy.

  • 424 million that was written off

  • in the last set of results is there for all to see.

  • It's not something you can hide from.

  • Certainly, the management aren't hiding from it.

  • They're disappointed.

  • They thought they had done a very good job on diligence

  • and they'd gone through the process

  • as well as they could, but ...

  • You know, that's a difficult place to operate.

  • And you have to remember also,

  • that as big as stake as it sounds,

  • it was only 18 percent of the company.

  • You're a minor shareholder.

  • So, the company will continue to do

  • what the company will continue to do.

  • We can only influence so much.

  • Having said that,

  • I think it would be fair to say,

  • there was a degree of naivete thinking that

  • everything that was disclosed to you

  • was all that there was.

  • It's never been that easy a place

  • to do business for New Zealanders

  • and I just think maybe they should have taken

  • a slightly more cautionary approach to the investment.

  • What do you think the long term effect

  • will be on New Zealand dairy farmers?

  • It's hard to know.

  • They're working with the management from Beingmate

  • to improve the business returns

  • and to put it on a stable footing

  • so it does what it's meant to do for New Zealand farmers,

  • which is to provide an avenue for markets and branding.

  • So, I think, FrieslandCampina, for example,

  • the Dutch cooperative, have stake in our company in China,

  • and they just wrote the whole lot off.

  • They're gone.

  • They just walked away from it.

  • Do you think that's an option for Fonterra?

  • Well, I think that you shouldn't hold onto a mistake

  • just because it took you a long time to make it.

  • So, I think time will tell.

  • I think, at the moment we're being told

  • is that they're looking to help the company improve returns.

  • So I guess that's where they're gonna go,

  • but I don't think there'll be much tolerance

  • from shareholders for any further losses.

  • I think the next director elections

  • could be very interesting for some people.

  • Yeah.

  • Especially since the CEO of Fonterra

  • is the highest paid CEO in New Zealand, right?

  • That is true.

  • That is true.

  • And there's a bit of talk about that as well.

  • I can imagine.

  • The BeingMate loss was not Fonterra's

  • first rocky investment in China.

  • Before the melamine scandal broke in 2008,

  • Fonterra owned a 43 percent stake in Sanlu.

  • Oops.

  • But since China is such a huge market for New Zealand milk,

  • Fonterra is still in it for the long haul.

  • And here in New Zealand,

  • the milk will still flow.

  • This is where the cows get milked.

  • So, 40 cows each side.

  • They come in.

  • They line up with their rump here, on an angle.

  • And we come along and we put the cups on them

  • and by the time this row is finished

  • the other side is rolled in

  • and we just basically switch them over to the other side.

  • Repeat until all the cows are gone.

  • We're milking about eight rows at the moment.

  • Okay.

  • How do the cows like it?

  • They're very happy.

  • And do you ever take a little bit off the top for yourself or your kids?

  • I've been known to regularly, yes.

  • I usually have a pint every morning.

  • A pint.

  • Do you want to try some milk?

  • I'd love it, cheers!

  • Let's get some milk.

  • So that should be enough.

  • Alright.

  • Oh, that looks thick.

  • Try it.

  • That's the best milk I've ever had in my life.

  • Really?

  • It's fresh.

  • Oh, it's fresh alright.

  • Yeah.

  • Yep.

  • You can almost taste the grass.

  • So now we know how milk goes from grass to cow to Chris!

  • Which is why I'm drinking as much New Zealand milk now as I can.

  • It's going to be a deeply unpleasant flight back to New York.

  • Chug chug chug chug!

On this episode of China Uncensored,

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Why Does CHINA want New Zealand DAIRY?

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    zijun su posted on 2021/06/15
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