Dairy products shortage predicted in China after Fonterra food scare

It takes 20 years to build a reputation and five minutes to ruin it, according to the legendary investor Warren Buffet.

The truism of that claim has been underlined by the recent food scare arising from a dirty pipe at a Fonterra processing plant in New Zealand.

Fonterra, the world’s largest dairy exporter and New Zealand’s biggest company, disclosed earlier this month that whey protein used in milk powder may have been tainted with botulism- causing bacteria.

China halted imports of some Fonterra products as the country’s official news agency Xinhua said buyers were losing faith in New Zealand’s clean image.

Economists are now predicting a shortage of dairy products in China, including foreign-branded infant formula, in the aftermath of the Fonterra food scare.

A Chinese diplomat in Wellington, Zhang Fan, declared that if the issue was dealt with appropriately, normal trade between the countries could resume.

But he warned that Fonterra had run out of chances with Chinese consumers after its third food safety issue in five years.

Mr Zhang said the Chinese government and general public attached a lot of importance to food safety issues.

Meanwhile, the latest New Zealand scare has prompted a dairy industry leader in Australia to push his government even harder for a free-trade deal with China.

Gary Helou, chief executive of Murray Goulburn Co-op, said the Australian government should accelerate a free trade agreement so farmers can better compete and exploit the obvious opportunity to grow market share in China.

Mr Helou said it is not in China’s national interest to have a total reliance on one source. Most global players and governments would tend to have multiple suppliers to mitigate risk.

China offers enormous growth prospects for dairy farmers. Demand is forecast to grow at 7% a year with domestic supply to grow by just 4%.

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