* NZ dollar drops 1.5 pct, Fonterra units slump near 9 pct
* NZ Prime Minister questions delay disclosure
WELLINGTON Aug 5 The New Zealand dollar and
units in dairy giant Fonterra's shareholders' fund slid
on Monday after bacteria that can cause botulism was found in
some dairy products, raising safety concerns about the country's
top export earner.
Fonterra, the world's biggest dairy exporter, said over the
weekend that contaminated New Zealand-made whey protein
concentrate had been exported to China, Malaysia, Vietnam,
Thailand and Saudi Arabia and used in products including infant
milk powder and sports drinks.
In response, China has halted all milk powder imports from
New Zealand and Australia, New Zealand Trade Minister Tim Groser
said. Some food producers including Danone said they
have recalled products that may have contained the contaminated
Dairy produce accounts for about a quarter of New Zealand's
NZ$46 billion ($36 billion) in annual export earnings, and the
currency is sensitive to Fonterra's fortunes.
Prime Minister John Key questioned why Fonterra took so long
to disclose the contamination, which affected product made in
"When ... your whole business is about food safety and food
quality, you think they'd take such a precautionary view to
these things and say if it's testing for some reason in an odd
way that (the product) would just be discarded till they're
absolutely sure it's right," Key said on Radio New Zealand.
He said Fonterra was New Zealand's flagship and the issue
went right to the "heart of undermining consumer confidence".
The New Zealand dollar fell nearly 2 U.S. cents to a
one-year low of $0.7670. It was also weaker against
most other major currencies and on a trade weighted basis was
down 1.1 percent against a basket of currencies.
"Further reaction is possible but will depend on the nature
of fresh information which unfolds," said Westpac senior
currency strategist Imre Speizer. "Indeed, reaction reversals
are possible if the scale of the issue is less than media
reports initially implied."
The kiwi last traded at $0.7750/60 against the U.S. dollar.
Units in Fonterra's Shareholders Fund, which offer outside
investors exposure to the cooperative's farmer shareholder
dividends, plunged as much as 8.7 percent before trading 5.9
percent lower at NZ$6.70.
Fonterra issued a statement to the New Zealand stock
exchange saying it had yet to hear officially of any product
"As far as Fonterra is aware, the New Zealand Government is
working with Chinese authorities to determine the scope of the
reaction, and no official notification has been received," it
Fonterra's chief executive, Theo Spierings, flew to China on
Saturday and is expected to give a news conference later on