* NZ govt officials despatched to Fonterra premises
* Sri Lanka, Brunei restrict imports, recall products
* No major impact on NZ economy - finance minister
* Fonterra units up 1.3 pct
* Fonterra's GDT price index falls 2.4 pct at fortnightly
By Naomi Tajitsu
WELLINGTON, Aug 6 Fonterra, the world's
largest dairy exporter, came under fire from the New Zealand
government, farmers and financial regulators for its handling of
a food contamination scare that has triggered product recalls
and spooked parents from China to Saudi Arabia.
The government sent officials to Fonterra premises to ensure
a clearer message and to regain international confidence after
New Zealand's biggest company was criticised for dragging its
feet in saying it sold whey protein products that contained a
bacteria that could cause botulism - a potentially fatal food
"We will be conducting an internal review and this will be
subject to external scrutiny as well," Gary Romano, Fonterra's
managing director of New Zealand Milk Products, told reporters.
The country's agricultural lobby urged Fonterra to be open
with parents of infants about details of the contamination.
"There will be a reckoning, but now is not the time; the 'who,
what, why, when, where and how' questions come later," Federated
Farmers Dairy Chairman Willy Leferink said in a statement.
"Right now, we owe it to our consumers here and abroad to give
them facts and not speculation."
New Zealand's Financial Markets Authority said it was
concerned about how long it took Fonterra to disclose the
contamination issue. The company said it confirmed on July 31
that this was caused by a dirty pipe at one of its New Zealand
plants, before issuing a media statement early on Saturday,
three days later, and an announcement to investors on Monday.
There have been no reports of illness resulting from the
affected products, but the scare risks tainting New Zealand's
"clean and green" image.
Finance Minister Bill English said the economy was likely to
escape any significant damage as a result of the Fonterra scare,
but there was some longer term risk to the country's reputation.
"The economic impact of the amount of product currently
under restrictions is sufficiently small (that) it wouldn't have
a discernible impact on our GDP," English said in reply to a
question in parliament.
On Monday, Fonterra CEO Theo Spierings said the company did
not face a ban on its products in China, only restrictions on
whey protein concentrate. He said he expected the curbs would be
lifted this week as soon as Fonterra provides Chinese regulators
with a detailed explanation of what went wrong.
China, Hong Kong, Sri Lanka and other countries, however,
have issued fresh instant formula milk product recalls, and the
New Zealand government warned that China could extend
restrictions on whey protein powder to other dairy products.
"So far, (there has been) very limited action. But this is
likely to change, and it would change in the direction of wider,
not narrower," Trade Minister Tim Groser told reporters.
Fonterra is a major supplier of bulk milk powder products
used in infant formula in China, but doesn't sell in China under
its own brandname after local dairy company Sanlu, in which it
held a large stake, was found to have added melamine - often
used in plastics - to bulk up formulas in 2008. Six babies died
then and thousands were taken ill.
China's consumer quality body said it ordered a recall of
two batches of milk formula brands marketed by Abbott
Laboratories, a day after some of the U.S. healthcare
company's products were recalled in Vietnam.
Abbot said the move was a precautionary measure after some of
its milk formula brands, which did not contain whey protein
concentrate sourced from Fonterra, were packaged in the
Cow & Gate recalled 80,000 cans of one type of its
stage-three baby formula in Hong Kong and Macau. It said there
were no signs of contamination in any of the products sold in
the two regions. More infant formula tins were cleared from New
Zealand supermarkets after Nutricia, part of French food group
Danone which makes the Karicare brand, announced a
blanket ban on two of its infant products late on Monday.
Sri Lanka suspended milk powder imports from New Zealand,
while Brunei media cited its government as ordering a recall and
the ban on the import, distribution and sale of Fonterra food
products. Fonterra has not identified either of
those countries as having been affected by the safety issue,
though it has said products containing the contaminated whey
protein had been sold on to Malaysia, Saudi Arabia and Thailand.
At its fortnightly Global Dairy Trade auction, the world's
biggest wholesale marketplace for milk powders and dairy
products - most of which originate in New Zealand - prices fell
for the first time in 6 weeks, while volumes jumped.
Fonterra's GDT Price Index dropped 2.4 percent,
following a 5.3 percent rise at the previous sale.
Ahead of the auction, analysts had said the event could help
gauge the likely impact of the contamination scare on prices and
sentiment towards New Zealand dairy products, which command a
premium over rivals. In the event, the drop in prices was less
than the 5-10 percent some analysts had predicted.
Dairy exports earn about a quarter of New Zealand's NZ$46
billion annual export earnings.
Units in Fonterra's Shareholders Fund, which offer outside
investors exposure to the cooperative's farmer shareholder
dividends, closed up 1.3 percent on Tuesday at NZ$6.95, erasing
most of the previous day's losses.
"If Fonterra gets knocked as far as confidence is concerned
then the farmer gets knocked, because at the end of the day
Fonterra is the farmer," said William Stolte, a farmer in
Masterton on New Zealand's North Island.
"And the farmer has to accept that ... meanwhile, we have to
keep milking the cows."