Fonterra Cooperative Group Ltd. (FCG), the worldâ€™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 andÂ TaiwanÂ 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 hasnâ€™t had any customer complaints and no goods had been recalled or blocked, he said.
â€œWeâ€™re providing all the information that is needed on a customer level,â€ Spierings said. â€œI would be very surprised if retailers are withdrawing product from the shelf.â€
Fonterra, the farmer-owned group that accounts for about 40 percent of the global dairy trade and sends about 20 percent of its exports toÂ 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 Fonterraâ€™s partner Sanlu Group.
Fonterra Shareholdersâ€™ Fund, an equity product that tracks the co-operativeâ€™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.
Chinaâ€™s General Administration of Quality Supervision, Inspection and Quarantine didnâ€™t respond to faxed questions by Bloomberg seeking confirmation if it was testing Fonterraâ€™s milk products and what the outcome was.
New Zealandâ€™s government is working with Fonterra to decide how DCD can be used on farms, theÂ MinistryÂ 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 Shareholdersâ€™Â Fund (FSF)Â 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 didnâ€™t disclose the findings then because there was no food safety risk, Spierings said.
â€œIf something is safe and youâ€™re well within specifications then you donâ€™t start to talk about it,â€ Spierings said.
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. Itâ€™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 Commissionâ€™s acceptable daily intake for DCD, and â€œconsiderablyâ€ 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.