Fonterra distances dairy auction from DCD scare

Fonterra moved to reassure customers over the safety of the dairy products sold at GlobalDairyTrade auction after the discovery of low levels of a toxic chemical in New Zealand supplies.

Auckland-based Fonterra, the largest dairy exporter, which sells a large proportion of its exports through its GlobalDairyTrade platform, distanced the dairy products for sale at the auctions, which set world benchmark prices, with those in which small doses of dicyandiamide (DCD) were found.

Fonterra said in a statement issued through the auction business that "none of the New Zealand-manufactured product being offered for sale during the next GDT trading event will have been produced during periods in which minute traces of DCD were detected in some dairy products".

GlobalDairyTrade auctions also sell on behalf of dairy groups from other countries, including Australia's Murray Goulburn, Denmark's Arla and US-based DairyAmerica.

'Future trade issue?'

The statement comes ahead of the next GlobalDairyTrade auction, on Tuesday, and amid lingering fallout from the discovery of the chemical, which has been typically applied to pasture in autumn, winter and spring in in an effort to reduce nitrate leaching into water courses, and to cut emissions from cow dung.

"Testing on whole milk powder detected the occasional presence of low levels of DCD coinciding with the times of the year that the product is applied," said New Zealand fertilizer group Ravensdown, which last week suspended sales of its eco-n product, which contains the chemical.

Fonterra said last week that it had been assured by New Zealand's government "that there is no food safety risk.

"However, DCD residues in agricultural products may present a future trade issue."

'Critical consideration'

Milk contamination is a particularly hot topic in China, the top huge importer of New Zealand dairy products, after the melamine scandal five years ago in which several babies died, and thousands fell ill, after drinking products tainted with the toxin, added to milk to give it a falsely high protein reading.

Buying foreign milk has been seen as a way for consumers in China - which imported some 400,000 tonnes of whole milk powder last year, all by a fraction from New Zealand to avoid food safety risks deemed higher in domestic supplies.

"It is critical that New Zealand's trade reputation is preserved," said Fonterra, which owned a 43% stake in Sanlu, the dairy company at the centre of the melamine scandal.

Volumes decline

Tuesday's GlobalDairyTrade auction will feature a offer a slightly lower level of Fonterra product than last time, reflecting the seasonality of New Zealand milk production, which peaks around October before falling to a low in June.

The contracts offered at the event will be from March to August, spanning the low output season.

Fonterra will offer 24,500 tonnes of whole milk powder, 3,850 tonnes of skim milk powder and 4,310 tonnes of anhydrous milk fat.

However, Arla is for the first time to offer skim milk powder in the front contract period.

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