QUEENSLAND-based biotechnology company Australian Reproductive Technologies (ART) and Chinese dairy giant Shanghai Dairy are setting up a lab near Shanghai to accelerate growth in the Chinese group's dairy herd using IVF technology.
In August 2013 ART boss Simon Walton inked a 10-year $40 million joint venture agreement with Shanghai Dairy, China's fourth-biggest dairy group, to use in vitro fertilisation to help grow the number of milking cows from 60,000 to 230,000 in the next five years.
Mr Walton told Financial Review Sunday on Channel Nine that the partnership is now establishing a lab and quarantine facility at Chongming Island off Shanghai.
"They want to expand their dairy herd... but it's no good increasing number unless you're also increasing production [litres of milk per cow]," Mr Walton said.
"We will produce many embryos from elite cattle... [and] transfer them into cattle that are less productive, so that these lower end cattle will have top end progeny."
This next step in Mr Walton's joint venture comes amid a red hot wave of interest from China in Australian dairy.
Last week Chinese heavyweight New Hope announced a deal with Australia's Perich Group and Freedom Foods to invest up to $500 million in new Australian dairy farms and processing capacity.
The New Hope deal was signed the day after the Abbott government penned a landmark free trade agreement with China providing unprecedented access to the fast-growing Chinese market.
Shanghai Dairy investment director Henry Gu said he hoped ART's technology would enable the company to dramatically increase the size of its herd and increase milk production from 95,000 to 130,000 litres a year.
"We first met Simon [Walton] in 2012 at Rockhampton Beef week. He introduced the OPU-IVF technology and his team to us. We realised this is the technology we need and this business model [has] huge potential in China," he said.
Mr Walton developed the process by combining aspects of human IVF technology with the cattle IVF procedures he uses to mass produce elite animals for farmers in Queensland.
He dismissed concerns his Chinese partner may not respect ART's intellectual property.
"Our relationship with Shanghai Dairy has been based on trust, and we are very happy to transfer all the technology we have and share it with our partners," he said.
He said his process delivers higher success rates than elsewhere in the world, but he could make improvements through his work with Shanghai Dairy.
"Our technology works better on a bigger scale," he said.
The facility at Chongming Island will also provide Mr Walton with a more tightly controlled environment to test components of his process.
"We've got many more variables than there are in China," he said.
"The biggest variable here is our climate and an unpredictable rainfall, which means unreliable pasture and hence nutrition."
Mr Walton said the joint venture is an example of collaboration between universities and businesses, and between Australian and international businesses. He said this is the way to further develop Australia's innovation.
"Here's an opportunity where we can have that exchange of information going very openly between countries for the enrichment of both countries," he said.