Construction of a $90 million milk processing factory northeast of Gore will begin later this year.
The plant could start producing milk powder in August next year.
New dairy company Mataura Valley, backed by New Zealand and overseas investors, yesterday announced plans to build a milk-drying plant at McNab, on the site of the former livestock saleyards, to produce what it called high-value, highly functional milk powders for Asian and Middle Eastern nutriceutical customers.
It is the second new dairy company to set up in Southland in the past 10 months, reinforcing a 15-year transformation of one of New Zealand's most productive sheep-farming regions into a key dairying area.
Mataura Valley's chief executive, Singapore-based Christopher Shelley, told the Otago Daily Times Southland was ideal for the venture.
It had a reliable climate, could produce quality milk, had room for future conversions of farms from sheep and beef to dairying, high protein and fat milk levels, and a long dairy season.
"I think we have picked a very good location."
Other companies think so, too, with Dairy Trust accepting the first milk for its new Awarua plant south of Invercargill in August, and Fonterra recently announcing a fourth drier at its Edendale site, which will handle its first milk at the end of 2009.
About 100 Southland sheep and beef farms converted to dairying for the 2007-08 dairy season and it is widely expected a similar number would convert for the coming season.
Mr Shelley said that rate of conversions should ensure enough new milk for all companies.
"There were about 100 conversions in Southland this year and about 100 more next [year].
''There could be 500 conversions in the next four to five years, producing a billion litres of milk."
Mataura Valley started the job of recruiting up to 80 suppliers at a meeting in Gore yesterday. It would take two years to reach plant capacity of 200 million litres a year, Mr Shelley said, adding a decision on expanding the plant would be made later.
"We're taking it one bite at a time."
Financial backers of Mataura Valley were primarily business investors rather than farmers or end users, he said.
Industry heavyweights, including former Fonterra senior executive John Shaskey and Max Parkin, former chief executive of the Southland Dairy Co-op (which later became part of Fonterra) have been recruited as advisers.
Mr Shelley and University of Otago graduate James Williams are listed as company directors.
They were confident the current dairy boom would continue for some time yet, driven by rising demand especially from China, which Mr Shelley said should last for another five or 10 years.
As with Dairy Trust and other independent dairy companies, farmers would contract their milk supply for a fixed period and for an agreed price, rather than owning shares.
