China halts the import of Fronterra milk powder

China has stopped all imports of New Zealand milk powders after Auckland-based dairy producer Fonterra Cooperative Group warned of a contaminated ingredient, said Trade Minister Tim Groser.

The decision by Chinese authorities is “absolutely appropriate,” Groser told Television New Zealand. Fonterra has said that an ingredient used in baby formula and other food showed strains of bacteria.

Fonterra, the world’s largest dairy exporter, is issuing the warning as China steps up scrutiny of local and international food companies after a spate of safety scandals. Any broad fallout would be a setback for the industry as the Asian nation is the biggest buyer of New Zealand dairy products, mainly milk powder.

“This is a very serious situation” for New Zealand, Groser said in the TV interview. “How serious it is depends obviously on the extent of the problem and how long it lasts.”

Dairy products make up about a quarter of New Zealand’s total overseas sales. China last month disclosed a probe into pricing of baby formula, prompting companies from Danone SA to Nestle SA to cut prices. Fonterra in July said it would cut prices in China for Anmum supplements for pregnant women.

Fonterra said Saturday that three batches of a whey ingredient made at a New Zealand plant last year may contain a bacteria that can cause a rare illness called botulism. The batches were mixed with other ingredients to form products sold in other markets, and several countries including China are affected, the New Zealand Ministry for Primary Industries said.

Four Chinese companies including units of Hangzhou Wahaha Group imported possibly tainted products from Fonterra, Chinese quality supervision regulators said in a statement yesterday. The products have been recalled, the regulator said. China asked local agencies to step up inspections of milk products from New Zealand.

New Zealand officials are working closely with Chinese and other authorities, Groser said, adding that the trade issues “are not just about China.” Calls made yesterday to the offices of China’s commerce ministry and national quality inspector went unanswered.

No Fonterra-branded consumer products are affected by the quality issue, the company has said. Fonterra separately markets a range of commercial ingredients that are sold to other food companies that use them to manufacture their own consumer products. The New Zealand company got about 14 percent of its revenue from China in the six months ended Jan. 31.

Fonterra said it had told eight clients about a quality problem after tests showed the possible presence of a strain of the bacteria Clostridium in a whey protein that the company’s customers use in infant formula, types of milk powder and sports drinks. There have been no reports of any illness linked to consuming the affected product, it said.

Fonterra said Chief Executive Officer Theo Spierings, who is visiting China for scheduled meetings, will speak with customers there.

The U.S. Centers for Disease Control and Prevention describes botulism as a rare but serious paralytic illness caused by a nerve toxin. In New Zealand, five batches of Nutricia Karicare follow-on formula products for children from 6 months old were identified as potentially containing contaminated protein, the Ministry for Primary Industries said.

Fonterra in January had to assure China that traces of an agricultural chemical found in some milk posed no health risks.

Bloomberg