Vol. 72/No. 42      October 27, 2008

Fonterra is the world’s largest dairy exporter and the flagship company for New Zealand capitalism. The company exports 95 percent of New Zealand’s dairy production to more than 140 countries. Fonterra has a major holding in the Chinese company SanLu, which supplies nearly one-fifth of China’s market with cheap infant formula.

China’s dairy industry is being shaken by a scandal over the contaminated infant formula. Governments of dozens of countries have announced bans or restrictions on the import of Chinese dairy products. Popular pressure has forced Beijing to begin acting to deal with the crisis. On October 6 the Chinese health ministry announced new limits on the trace amounts of the chemical melamine allowed in dairy products.

The chemical is used to bamboozle government milk quality monitors by boosting protein readings of watered-down milk. It is harder to detect than rice porridge, which has also been used. As melamine accumulates in the child’s body, it can damage the functioning of the kidney, commonly leading to kidney stones. In the worst cases it leads to kidney failure and death.

According to the Dominion Post, Fonterra found out about the contamination in the milk on August 2. The company reported its concerns, without details, to the New Zealand embasssy in China on August 14. It did not inform the Chinese government until September.

Bloomberg news agency reported September 24 that Chinese officials had pulled 7,000 metric tons of milk products from store shelves, and had begun inspecting dairy farms nationwide. To date, authorities have arrested 18 people, including dairy company bosses and owners of milk collection stations.

Wang Xuening, deputy chief of the health ministry’s inspection and supervision department, said the new limits on melamine levels allowed in foods refer only to seepage from packaging or other unintended results. “Deliberately adding the chemical to food items is prohibited,” Wang said.

An editorial in the September 21 New Zealand Herald noted that Fonterra claims a code of “moral courage and leadership.” It went on, “One has to wonder where those qualities were for the 40 days and 40 nights between August 2, when the company first became aware that the milk powder … was contaminated by a lethal chemical, and September 11 when it saw fit to disclose the matter.”

On September 24 Fonterra officials announced the company would write down by 70 percent the value of its SanLu holding.  
 
 
Front page (for this issue) | Home | Text-version home