Fonterra's milk powder saga costs

Last updated 05:00 08/03/2014

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Fonterra's decision to destroy 130 tonnes of milk powder in Sri Lanka is positive for the reputation of the New Zealand dairy industry, Federated Farmers says.

Sri Lankan media reports say the New Zealand dairy giant asked that the milk powder, imported before June 1 last year, be destroyed.

The powder, worth more than $700,000, had been held since last year following Sri Lankan concerns about possible contamination by fertiliser aid dicyandiamide (DCD).

A Fonterra spokesman, who would not be named, said the powder was nearing its expiry date and disposal was in accordance with normal procedure and in line with regulations in Sri Lanka.

Sri Lanka is New Zealand's fifth-largest milk powder export market and Fonterra has a processing plant in the country employing about 750 people.

The disposal was the latest development in the saga relating to low-level DCD contamination of some of Fonterra's dairy products in 2012. Fonterra undertook tests for DCD in September 2012, two months before the Ministry for Primary Industries (MPI) was alerted. Fonterra announced the contamination to the public in January 2013. Sri Lanka started testing all imported milk powder for DCD in July last year.

In August, Sri Lankan officials ordered a recall of dairy products after they said DCD was found in two batches of imported milk powder. However, Fonterra disputed DCD traces were present in the product in Sri Lanka and said the testing regimes were flawed. The nitrate inhibitor is added to fertiliser and New Zealand officials say it is not dangerous.

Federated Farmers dairy chairman Willy Leferink said disposing of old powder indicated New Zealand was "very serious" about safe food. The move showed Fonterra was not trying to reintroduce potentially dangerous product into the human food cycle, Leferink said.

"For me, as a supplier to Fonterra, I want them to make sure any customer and any consumer gets safe food."

The DCD contamination resulted in international concerns over Fonterra's level of food safety.

In August last year one Sri Lankan newspaper said New Zealand milk was "not fit for consumption" and described the company as behaving like a "stereotypical multinational".

Other coverage, however, pointed to a fierce battle for milk share in Sri Lanka and a potentially incompetent milk-testing regime.

According to Sri Lankan media reports from last week a Sri Lankan Health Ministry spokesman said Fonterra made the request because testing small consignments of milk powder for DCD was not economically viable.

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The Fonterra spokesman said the media had blown the destruction of the powder out of proportion.

Fonterra has suffered a string of contamination issues.

Last August's botulism contamination false alarm led to a widespread product recall.

Fonterra is now facing a court battle with affected French food giant Danone.

And in January Fonterra was forced to recall a batch of fresh cream contaminated with E. coli.

- BusinessDay

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