Fonterra units hold up in early trading, despite DCD scare

Fonterra Shareholders Fund units took a small, immediate knock as trading opened on the NZX this morning after a weekend in which international media latched on to the news that small traces of a nitrate inhibitor had been found in some Fonterra milk powder.

FSF units dropped 0.4%, or 3c, to $7.20 at the open of NZX trading, and bid and ask prices were displayed briefly as low as $7.14 and $7.18 before recovering to a range of $7.20 and $7.23 in the first 10 minutes of trading and appeared to be holding those levels.

Global investor reaction may yet occur in other markets, although the Australian Stock Exchange is closed today for a national holiday long weekend.

Despite assurances the levels of the chemical, known as DCD, are far below European Union food safety thresholds, the incident has produced scare-mongering reports which Fonterra will now have to work hard to counter.

Prime Minister John Key used his weekly morning radio slot on Newstalk ZB to label some international media reports as "misinformation" after highly reputable sources such as the Wall Street Journal website headlined reports with the question" "Is New Zealand milk safe to drink?"

''The situation here is that there is no health risk, at all," he said. "Key told Newstalk ZB he would be concerned if international consumers reacted to 'misinformation.'

''The situation here is that there is no health risk, at all," he said, echoing comments by Fonterra chief executive Theo Spierings, who issued media statements over the weekend to try to reassure export markets.

''Once you get these sort of stories written, even if they're incorrect, it's a big job to close them down," Mr Key said.

Theo Spierings said reactions were ''way out of proportion."

Nitrous oxide is a greenhouse gas produced by grazing stock and accounts for around 16% of the country's annual emissions contributing to climate change.

DCD has been used by some farmers to limit such emissions, with nitrogen inhibitors being one of the few technologies currently available to farmers to cut emissions, which in total account for around half New Zealand's total annual GHG emissions.

BusinessDesk