Investors unfazed by DCD milk find
Investors in Fonterra Shareholders' Fund units have shown little reaction to the recall of a product reducing nitrates in water being found in milk powder.
The active ingredient in nitrification inhibitors owned by fertiliser co-operatives Ravensdown and Ballance is dicyandiamide (DCD), and traces of it were found in Fonterra powder by a government and industry working party.
Sales of the products branded eco-N and DCn were suspended on Thursday as a result of international food safety bodies adding DCD to a testing list last year. Until new international standards are set the products are off the shelves to prevent any risk of the dairy export industry's reputation being tarnished.
Authorities say there is no food safety risk to the compound, but the owners of the products are unable to guarantee its complete exclusion in milk.
Fonterra investors, many of them off the farm, seem mostly unbothered by the recall, with fund units trading yesterday down 8c from Thursday's closing transaction of $7.31. Unit prices went as far down as $7.21 yesterday morning, but nudged back up again to close at $7.23.
Hamilton Hindin Greene director Grant Williamson said there had not been too much of a reaction to the recall, with trading down just over 1 per cent.
"Normally when there is negative news we can get quite a bit of selling, but we haven't seen much reaction at all. It indicates no-one is overly concerned . . ."
The Christchurch sharebroking company has watched as unit prices have continued to rise since they were first offered two months ago.
Do you agree with claims that Fonterra is transferring wealth from farmers to unit holders and to the dividend in contradiction of its milk price manual?Related story: Lower milk price 'to boost dividend'