Fonterra Seeks to Reassure China, World on Milk Safety

January 30, 2013 06:58 AM

The New Zealand dairy giant consults with its biggest customer China after traces of an agricultural chemical were found in some of its milk products.

Jan. 28 (Bloomberg) -- Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, is consulting with its biggest customer China after traces of an agricultural chemical were found in some of its milk products.

China and Taiwan are testing some products after the Auckland, New Zealand-based company said on Jan. 24 that minimal levels of the fertilizer additive dicyandiamide, known as DCD, were present in some samples, Chief Executive Officer Theo Spierings said in a telephone interview. The company hasn’t had any customer complaints and no products had been recalled or blocked, he said.

"We’re providing all the information that is needed on a customer level," Spierings said. "I would be very surprised if retailers are withdrawing product from the shelf."

Fonterra, which accounts for about 40 percent of the global dairy trade and sends about 20 percent of its exports to China, said Jan. 24 the discovery of the additive may become a trade issue even though it presents no safety risk. Milk safety in China became a major issue in 2008, when locally made melamine- contaminated milk powder may have killed at least six infants, causing the collapse of Fonterra’s local partner Sanlu Group.

DCD is used to improve water quality on farms by reducing nitrate levels, as well as cut greenhouse gas emissions, according to the New Zealand government. It’s been used on about 500 out of around 12,000 dairy farms, industry group Federated Farmers said last week.

Additive Found

Traces of DCD were first discovered in September, said Spierings, prior to the company listing a NZ$525 million ($439 million) fund on the New Zealand stock exchange in November. Fonterra didn’t disclose the findings then because there was no food safety risk, Spierings said.

"If something is safe and you’re well within specifications then you don’t start to talk about it," said Spierings today.

A person weighing 60 kilograms would have to drink more than 130 liters of milk to reach the European Commission’s acceptable daily intake for DCD, and "considerably" more to have adverse health effects, according to the Ministry for Primary Industry’s website.

Fonterra Shareholders’ Fund fell 1.1 percent to NZ$7.15 at 1:35 p.m. in Wellington, compared with a 0.2 percent gain in the New Zealand Exchange 50 Gross Index.

New Zealand’s government is working with Fonterra to decide how DCD can be used on farms, the Ministry for Primary Industries said. The absence of agreed international levels in foods means that any presence could be unacceptable to some markets, it said.

Ravensdown Fertiliser Co-operative Ltd. and Ballance Agri- Nutrients Co-Operative’ voluntary suspended DCD sales last week to avoid any trade risk, Ravensdown Chief Executive Officer Greg Campbell said in a statement.

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