China lifts temporary ban on Fonterra whey products but one by Russia remains

Chinese authorities have lifted a temporary ban on the importation of Fonterra Cooperative Group's [NZX: FCG] whey powder and dairy base powder used in the manufacture of infant formula that has been in place since August last year in the wake of the dairy company's botulism scare.

At the time, Fonterra chief executive Theo Spierings said he was confident the suspension could be lifted within 48 hours. Fonterra is refusing further comment on the move which was announced by the Ministry for Primary Industries.

A ban by Russia imposed at the same time remains in place. Though MPI officials are still negotiating to get the ban lifted, it says no timeframe for doing so has yet been agreed on.

The temporary suspension accounted for 3 percent of New Zealand’s dairy exports to China which were valued at $2.6 billion in 2012. Fonterra, is responsible for 90 percent of the country’s dairy exports to China.

The temporary ban didn't impact whole milk powder and skim milk powder or imports of infant milk formula that had already been processed.

The whey powder is used in a variety of products while the whey-based dairy base powder is sold to third-party manufacturers who turn it into infant formula.

When news of the on-going ban was revealed by MPI in April, Fonterra said it didn't think the suspension warranted mentioning until it had been lifted. At the time it said the affected product represented a small amount of its exports and overall trade volumes to China had increased 15 percent compared with 2013.

New Zealand's biggest dairy co-operative was fined $300,000 in April for causing the food safety scare that Judge Peter Hobbs said had "shaken" New Zealand's reputation as an exporter. The company also reached a $150,000 settlement in June with the NZX after breaching rules around continuous disclosure of information.

It is still facing civil action by French company Danone, the parent company of infant formula maker Nutricia, which had to recall 67,000 cans of Karicare infant formula in New Zealand. The two parties are to going to arbitration in Singapore over the compensation claim which followed Danone cancelling its supply contract with Fonterra.

Units in the Fonterra Shareholders' Fund, which gives investors exposure to Fonterra's dividend stream, were unchanged at $6.29, and have gained 8.5 percent this year.

The kiwi dollar briefly spiked 20 basis points after the announcement, but has since come down, recently trading at 78.36 US cents.

(BusinessDesk)