Fonterra escapes blanket ban

The threat to Fonterra's $NZ2 billion ($1.75 billion) annual sales to China from the botulism-risk alert has eased slightly as it was confirmed China had not imposed a blanket ban on Fonterra products.

China is the New Zealand dairy group's biggest customer, accounting for 10 per cent of its total sales of nearly $NZ20 billion last year.

Chinese authorities have suspended imports of whey powder and a whey-based dairy ingredient used in making infant formula, produced by Fonterra or made in Australia using Fonterra's whey ingredients.

Three batches of a whey protein made at Fonterra's Hautapu plant, near Hamilton on the North Island, last year are at the centre of a botulism scare. Fonterra's staple exports - whole-milk powder and skim-milk powder - do not contain whey protein, which is also used in making sports drinks and infant formula sold in New Zealand.

But the taint on New Zealand's dairy-export image remains, with confirmation China has intensified border inspections of Kiwi dairy products and indicated extra testing may start.

The government was "very conscious" of the risk to New Zealand's reputation as a producer of safe, high-quality foods, Trade Minister Tim Groser said. Food accounts for more than half of its exports, which in turn make up about 30 per cent of gross domestic product.

"We sell ourselves and our image and justifiable reputation for having put high-quality food on tables" around the world, Mr Groser said. "That reputation has been got there not by spin but by world-class high performance. That's still intact."

Fonterra, which accounts for about a third of the world's trade in dairy products, said China's decisions were not expected to affect a GlobalDairyTrade auction of dairy products.

Mr Groser said China's actions were "measured" and hadn't affected products such as whole and skim milk powders, which make up 95 per cent of New Zealand's shipments to China.

In New Zealand, baby formula firm Nutricia refused to say whether it would take legal action against Fonterra after being supplied with potentially contaminated whey. Two Nutricia products were recalled at the weekend.