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DCD concerns: Too early to predict NZ export fallout, says Rabobank

By Mark Astley , 30-Jan-2013

It is "difficult to say" if New Zealand dairy exports will suffer as a result of the on-going concerns surrounding dicyandiamide (DCD) contamination, Rabobank has claimed.

In the last week, concerns about the safety of New Zealand dairy products spread across parts of Asia after it emerged that low levels of DCD – an agricultural chemical – had been discovered in samples of Kiwi-manufactured dairy products.

DCD, which is applied to pasture by farmers to prevent nitrate leaching into rivers and lakes, has never been considered to be a food safety risk,

There is no international standard for it in food, but authorities in a number of countries including China and Malaysia have stepped-up checks on shipments of New Zealand dairy products.

Rabobank dairy analyst Kevin Bellamy told DairyReporter.com that New Zealand’s government and dairy industry has been working hard to counter the concerns. It declined to predict, however, what impact the discovery may have on exports.

Chance of regulatory fallout?

“It is difficult to say whether there will be an impact on the New Zealand dairy industry this early. The New Zealand dairy industry, Fonterra, and the country’s government have been working hard to limit damage,” said Bellamy.

“They have put out a lot of information on DCD to reassure importing countries - especially China. All the information out there is that DCD is a harmless substance.”

“It is still early days, but if there was any chance of any regulatory fallout, Fonterra would be busy removing its products from the market,” he said.

According to Bellamy, it is also too early to say if importers will look elsewhere for a ‘safer’ option.

“It is still early days. It has only been a few days. It is too early to say if importers will look elsewhere.”

He said, however, that rival such as Europe and the US are unlikely to see the safety concerns as a competitive advantage.

“I think that everyone will move to reassure that there is no issue here. I think it is more important for them to reassure importers that DCD is not a food safety issue,” he said.

Regulatory issue, not food safety

Bellamy added that Fonterra – the world’s largest dairy exporter – is unlikely to let its lucrative interest in the Chinese market suffer as a result of the DCD contamination concerns.

“If you look at export statistics, December 2012 was a strong finish to the year for New Zealand. They exported 220,000 tonnes – its highest single month ever. Around 103,000 tonnes of this went to China. So you can see why Fonterra and New Zealand want to safeguard the market,” he said.

“DCD has been around for the last ten years. This is a regulatory issue, not a food safety issue.”

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