Fonterra Co-Operative Group Ltd.'s Andrew Ferrier is looking for greener pastures.

As a growing middle class across Asia push up demand and prices for milk, the dairy giant's chief executive looks to expand operations outside its home base of New Zealand.

Fonterra, which produces about a third of the world's internationally traded dairy products, is pushing ahead with a plan to build farms in China, although its strategy there was hurt in 2008 when a contaminated milk scandal led to the death of several infants. The tainted milk was traced back to 22 companies, including Shijiazhuang Sanlu Group Co., in which Fonterra held a 43% stake.

Fonterra maintains that it wasn't aware of Sanlu's decision to continue producing infant milk products contaminated by the chemical.

Formed in 2001, Fonterra supplies milk, cheese and yogurt to 140 markets world-wide, including Egypt where it last week resumed operations after suspending them in the wake of the recent political unrest. Generating 16.73 billion New Zealand dollars (US$12.74 billion) annually, the company employs a complicated hedging strategy to smooth out the effect of foreign exchange fluctuations up to 18 months in advance.

Born in Canada, Mr. Ferrier started his career with U.K. sugar and food-ingredients producer Tate & Lyle and progressed in the sugar business in Canada, the U.S. and Mexico.

At 51 years old Mr. Ferrier is a keen ice hockey player. 'It makes me feel good because I can still keep up with these younger Kiwis,' he says. 'Being Canadian, it's genetic in me.'

Mr. Ferrier recently spoke to The Wall Street Journal about China, rising milk prices and the controversysurrounding genetically modified food at Fonterra's headquarters in Auckland, New Zealand.

WSJ: What are the main drivers behind the reemergence of global food price inflation?

Mr. Ferrier: The underlying factors that underpinned food price inflation in 2007 and 2008 have not gone away: Growth in population, wealthier societies looking for more food. Volatility is being exacerbated by a lot of weather events around the world.

Fundamentally, we all have to think about how we sustainably feed the world over the long term. We know that we are not going to be able to feed the opportunities in growth in dairy out of New Zealand. There isn't the space for that. So as we talk to customers about their needs, we see they are looking for safe healthy milk in the fastest growing economies. [That's] why we have gone into farming in China.

WSJ: What else is pushing up global milk prices?

Mr. Ferrier: We see a very steady rise in global consumption of dairy products. [As] developing nations get wealthier, there is a bigger middle class looking for healthier foods. Some people say they are switching from carbohydrate-based diets to protein-based diets, fueling a need for protein and dairy.

We are [also] seeing a rise in the underlying cost of production around the world, because fuel prices are up, fertilizer prices are up, feed prices are up.

WSJ: How are you building a presence in China and what other markets are you interested in?

Mr. Ferrier: It's not the same kind of farming that we do in New Zealand. In China we have to bring grain to the cows. We are in the middle of building our second farm; [a] third [is] scoped out and we expect to be involved in multiple farms that can supply fresh milk into the Chinese economy. Safe healthy milk.

We feel a bit of an obligation to help the Chinese get back on their feet. It was a tragic thing that happened a couple of years ago. It showed the lack of control within their supply chain. We want to make sure that we are running the business that is producing the milk [in] every step of the operation.

We are also in discussion with a couple of key players in India now. Traditionally, they have been self-sufficient in dairy but it is looking like their consumption is going to grow faster than they can produce it.

WSJ: What about the controversy over genetically modified food?

Mr. Ferrier: It has become quite mainstream. I think ultimately that is a good thing. We won't sell genetically modified American milk products here in New Zealand because our consumers don't want them. Same thing in Australia.

We do a lot of selective breeding. We've got a division that looks at the breeding of cows to get better attributes out of the milk, more protein for example, maybe less fat, less saturated fat.

Rebecca Howard