Bloomberg News

Fonterra CEO Seeks to Reassure China, World on Milk Safety

January 27, 2013

Fonterra Seeks to Reassure China, World on Milk Safety, CEO says

A cow stands in a herd at Fonterra Cooperative Group Ltd.'s Tangshan farm in Tangshan, Hebei Province, China. Photographer: Nelson Ching/Bloomberg

Fonterra Cooperative Group Ltd. (FCG), the world’s largest dairy exporter, assured its biggest customer China that traces of an agricultural chemical found in some milk products posed no health risk, Chief Executive Officer Theo Spierings said.

China and Taiwan are conducting tests 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, Spierings said in a phone interview. The company hasn’t had any customer complaints and no goods 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, the farmer-owned group that 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 concern even though there was no health 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 partner Sanlu Group.

Fonterra Shareholders’ Fund, an equity product that tracks the co-operative’s dividends and earnings, fell 1.4 percent to NZ$7.13 at the close in Wellington. The units, which have no voting rights, dropped 1.1 percent on Jan. 25, the day after Fonterra first disclosed the DCD readings.

China Quarantine

China’s General Administration of Quality Supervision, Inspection and Quarantine didn’t respond to faxed questions by Bloomberg seeking confirmation if it was testing Fonterra’s milk products and what the outcome was.

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.

Traces of DCD were first discovered in September, Spierings said, prior to the listing of the Shareholders’ Fund (FSF) on the New Zealand stock exchange in November. The market value of the fund has risen to NZ$682 million ($570 million) from NZ$525 million since it began trading. 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,” Spierings said.

Water Quality

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 about 12,000 dairy farms, industry group Federated Farmers said last week.

A person weighing 60 kilograms (132 pounds) would have to drink more than 130 liters (34 gallons) 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 Industries website.

Ravensdown Fertiliser Co-operative Ltd. and Ballance Agri- Nutrients Co-operative, which make 98 percent of New Zealand fertilizers, voluntarily suspended DCD sales last week to avoid any trade risk, Ravensdown Chief Executive Officer Greg Campbell said in a statement.

To contact the reporter on this story: Chris Bourke in Wellington at cbourke4@bloomberg.net

To contact the editor responsible for this story: Edward Johnson at ejohnson28@bloomberg.net


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