Nestle and the government of Shuangcheng city in Heilongjiang province signed a deal under which Nestle will build China's biggest fresh milk supply operation within five years, the official Xinhua news agency reported.
The deal will include a training center for the management of dairy farms. Shuangcheng has more than 20,000 milk farmers who produce 1,200 tonnes of milk every day, the report said.
In October, Xinhua reported that some farmers in the city said they had been underpaid for their milk, citing a 2002 pact that requires all milk in Shuangcheng to be delivered to Nestle.
Nestle told Reuters at the time that it does not tolerate such practices.
China's rapidly growing but fragmented dairy industry is attempting to win back consumers' confidence after a series of scandals involving milk tainted with toxic substances.
In 2008, at least six children died and nearly 300,000 became ill from powdered milk laced with melamine, an industrial chemical added to low quality or diluted milk to fool inspectors by giving misleadingly high readings for protein levels.
China plans to nearly double milk production to 64 million tons by 2020, as part of a long-term plan by the ministry of agriculture to improve nutrition. Its 7 million cows now produce about 38 million tons. (Reuters)
