China halts milk powder imports from New Zealand, Australia
China has halted imports of all milk powder from New Zealand and Australia, New Zealand's trade minister said on Sunday, after bacteria that can cause botulism found in some dairy products raised food safety concerns that threatened its $9.4 billion annual dairy trade.
Global dairy giant Fonterra identified eight companies to which it had sold contaminated New Zealand-made whey protein concentrate, exported to China, Malaysia, Vietnam, Thailand and Saudi Arabia and used in products including infant milk powder.
Nearly 90 percent of China's $1.9 billion in milk powder imports last year originated in New Zealand and economists said a prolonged ban could produce a shortage of dairy products in China, including foreign-branded infant formula.
Australia was caught up in the ban after some of the contaminated whey protein concentrate was exported there before being sent on to China and elsewhere.
"The authorities in China, in my opinion absolutely appropriately, have stopped all imports of New Zealand milk powders from Australia and New Zealand," New Zealand Trade Minister Tim Groser told Television New Zealand.
(Read more: Worlds's biggest dairy exporter issues botulism alert)
While there was no official word of a ban from Chinese authorities, China's consumer watchdog named four companies that had imported potentially contaminated products from Fonterra.
In a statement on its website, the General Administration of Quality Supervision, Inspection and Quarantine identified the companies as Dumex Baby Food Co., Ltd, a subsidiary of France's Danone, two subsidiaries of Wahaha Group, one of the largest beverage manufacturers in China, and the state-owned Shanghai Sugar, Tobacco and Alcohol company.
Fonterra, a big supplier of wholesale dairy ingredients to multinational food and beverage companies, also said that Coca Cola's Chinese subsidiary and animal feed companies in New Zealand and Australia had also been affected.
The State Food and Drug Administration (SFDA), in an announcement on its website, said it had told representatives from Hangzhou Wahaha, Dumex and Coca Cola China to stop sales of potentially contaminated products and recall any outstanding product lines with possible contamination as soon as possible.
Some of China's biggest food and beverage firms are said to be customers of Fonterra.
Fonterra is a major supplier of bulk milk powder products used in infant formula in China but it had stayed out of the branded space after Chinese dairy company Sanlu, in which it had held a large stake, was found to have added melamine - often used in plastics - to bulk up formulas in 2008.
More than six children died in the industry-wide scandal and hundreds became ill. Foreign-branded infant formula has since become a prized commodity in China.
(Read more: Chinese search for infant formula goes global)
The latest scare coincided with global dairy prices hovering near record highs as supply struggles to keep up with growing demand from emerging countries. A ban on New Zealand products was seen pushing overall prices higher in the near term.
Economists said domestically produced Chinese dairy supplies were at low levels and Beijing's ban on imports from New Zealand and Australia would tighten supplies on the consumer market.
"Domestic production in China has been fairly weak, so potentially there could be a shortage of product for a while," ANZ economist Con Williams told Reuters. He said China would in the meantime likely turn to the United States and Europe.
Bans, recalls
Other countries also were reportedly halting imports and ordering recalls of New Zealand-made dairy products.
Russia suspended imports and circulation of Fonterra products, ITAR-TASS news agency said on Saturday, quoting consumer watchdog Rospotrebnadzor. Media reports said Thailand had ordered a recall of Fonterra products imported since May.
In New Zealand, Nutricia, a division of Danone, recalled some types of infant formulas sold under the Karicare brand.
The bacteria behind the latest scare, Clostridium Botulinum, is often found in soil. The Fonterra case was caused by a dirty pipe at a processing plant.
It can cause botulism, a potentially fatal disease that affects the muscles and can cause respiratory problems. Infant botulism can attack the intestinal system.
This is the second contamination issue involving Fonterra this year. In January, it found traces of dicyandiamde, a potentially toxic chemical, in some of its products.
China has started to tighten dairy import regulations to improve overall food safety. Beijing has introduced regulations restricting the operations of smaller infant formula brands.
(Read more: Fearing Contamination, Chinese Pay More for Imported Infant Goods)
Williams at ANZ said it would be a major concern if more countries banned New Zealand dairy imports as dairy accounts for roughly 25 percent of exports - NZ$12 billion in the past year.
Federated Farmers Dairy Chairman Willy Leferink told Reuters he was "extremely concerned" about the impact on the industry.
"Food safety is paramount to New Zealand so this is the last thing anybody wants," he said.