Keeping it in perspective

August 8, 2013

A lot of the media have been referring to the contaminated whey scandal.

On Monday’s Farming Show, Jim Hopkins pointed out that it was a scare not a scandal and Macdoctor adds some more perspective to the issue:

With everyone all abuzz about the latest Fonterra debacle, the MacDoctor thought it may be helpful to inject a little perspective into the situation by comparing it with the SanLu scandal.

SanLu Fonterra
Contaminant: Melamine C. Botulinus
Introduced by: Deliberate, For profit Accidental
Discovered by: Investigation after death of children Routine Investigation
Time taken to public announcement: 5 weeks from confirmation 3 days from confirmation
Number injured 300 000 0
Number hospitalised 54 000 0

Last night’s media release makes the contrast even greater – there was almost no time wasted in making a public announcement.

Contrary to earlier reports, Fonterra didn’t confirm tests until Friday and immediately notified the Ministry of Primary Industries and the public notices followed within hours.

That the company’s inept public relations was responsible for earlier information doesn’t reflect well on it.

Thankfully its food safety standards are considerably better than its initial communication led us to fear.

And for a completely different perspective The Civilian says Chinese media says problem with New Zealand economy is that New Zealand isn’t a ruthless dictatorship:

Chinese media have lashed out at New Zealand this week following the potential contamination of thousands of tins of baby formula by dairy giant Fonterra, saying that it was only able to happen because the country’s economy was not governed by a ruthless authoritarian state willing to terrify its citizens and companies into compliance.

Writing in the China Daily, columnist Huan Bai blamed the recent contamination scare on New Zealand’s “individualist philosophy” which “puts emphasis on personal freedoms ahead of efficiency,” and a laissez-faire economic system that allowed human beings to make choices for themselves, pursue their dreams and be content in their own fallibility without living in continual fear of execution if something goes wrong. . .


Not another Chinese milk scandal

August 12, 2010

When I heard the news yesterday that hormones in milk might be behind the early sexual development of Chinese girls I feared the worst.

This was going to be a repeat of the Sanlu melamine poisoning scandal and once more Fonterra was implicated.

The company was quick to say:

Fonterra is a supplier of milk powder to Synutra International but we understand Synutra sources some milk locally and imports whey powder from Europe.

In New Zealand there are strict legislative controls on the use of Hormonal Growth Promotants (HGPs) – they are not allowed to be used on milking cows.

The strict controls mean that it is not necessary for New Zealand milk or milk products to be routinely tested.

Fonterra remains 100% confident about the quality of its products.

Thankfully our reputation for high standards of food safety mean when Fonterra says this.

Thankfully too,  Dunedin School of Medicine’s head of paediatrics Professor Barry Taylor says it’s unlikely milk powder is the cause.

“If there were three cases here in Otago I probably would not jump up and down. And certainly not if there were three cases in several many millions of people. There would be a natural number occurring, and I suspect, [if milk powder was the cause] there would be somewhat more than three,” Taylor told ONE News.

But false alarm or not, it is another reminder that the standards we adhere to in New Zealand are not those in all other countries.

Where Fonterra would almost certainly believed, the story of the cover-ups in the Sanlu scandal  show that it would be difficult to put the same level of trust in Chinese companies.

Adolf at No Minsiter says this is the reason we should prevent Chinese interests from buying up large chunks of our dairy industry.

I wouldn’t go that far but I do think it is essential that the integrity of our food production and processing is safeguarded whether it is foreign companies operating here or ours operating in other countries.

We can’t compete on price with countries like Brazil but we can compete on quality. Food safety is an important ingredient in our reputation for quality and we can not afford to have it compromised by people who don’t share our standards.


On-line reselling has dangers for buyers and producers

January 16, 2010

The Food Safety Authority is invetigating claims that Chinese people are buying large amounts of New Zealand infant  milk powder here to sell on-line in their home country.

It’s understandable that parents in China don’t trust their own milk powder in the wake of the Sanlu melamine poisoning, but buying on-line has risks too.

Producers are concerned that their product may be sold in a damaged state which may compromise the safety of the product and reflect badly on them.

Another concern is that the contents of the tins may not even be New Zealand milk powder.

Immense damage could be done to New Zealand’s reputation for safe food products if their were problems with the standard of something purporting to be our produce.

It is difficult to police internet sales and the buyer should always beware. But there is little a company can do to stop people buying their produce and selling it on-line in other countries, or using their containers to sell an inferior substitute.


Melamine scandal gets murkier for Fonterra

January 28, 2009

Tian Wenhua the former chairwoman of Sanlu who was convicted for her part in the melamine milk poisoning scandal said she acted on advice given by a Fonterra board member.

But Fonterra’s chief executive Andrew Ferrier says the company was always clear there was no safe level of melamine in milk.

China’s state news agency, Xinhua,  . . .  said rather than stopping production of tainted products after the contamination was confirmed on August 1 last year, Sanlu decided to limit melamine levels to within 10mg for every kilogram of milk.

“Tian said during her trial that she made the decision not to halt production of the tainted products because a board member, designated by New Zealand dairy product giant Fonterra that partly owned Sanlu Group, presented her a document saying a maximum of 20mg of melamine was allowed in every kg of milk in the European Union,” Xinhua said. “She said she had trusted the document at that time.”

Mr Ferrier told the Herald a Fonterra representative had given Tian the document soon after the board was advised of the contamination on August 2.

“The context was when this whole thing broke there was an enormous amount of work going on to find out what melamine was and there was research all over the world about its contaminants, its danger,” Mr Ferrier said. “There was information pulled up from Europe, from the US, everywhere.”

. . . Mr Ferrier said: “I do want to be crystal, crystal clear – although there was lots of information that was pulled up we were vividly clear to Sanlu that the only acceptable level [of melamine] was zero.”

At no point did Fonterra tell Sanlu it was acceptable to keep producing to the melamine level in the report, he said. “Absolutely not, absolutely not.”

I believe Ferrier but it’s not me he needs to convince, it’s consumers who rely on the company’s commitment to the highest possible safety standards for its products.

Just a few months ago Fonterra was being held up as the model to which other processors of primary products should aspire. The fall in world commodity prices is  a large part of the reason this has changed and the company can’t be held responsible for that. But another reason is that it has not handled the melamine scandal well.

As Keeping Stock says:

. . . Fonterra still has a lot of questions to answer, and there’s no escaping the perception, whether merited or not, that Fonerra has been less than transparent throughout.

Fonterra has appeared to be on the backfoot throughout  the whole sorry saga and Roarprawn  is right when she says the company needs a rocket.

Paul Henry discussed the issue with Fran O’Sullivan on Breakfast yesterday and she said that the company made a fundamental mistake at the start by thinking the scandal could be isolated as a Chinese problem. She also said that journalists have been unimpressed by the slow response from the company.

A large company ought to understand the importance of not just being on top of such a potentially damaging issue but showing the world it is on top of it. Regardless of how well the Fonterra may be handling things behind the scenes its poor public relations are giving the impression it’s not handling things well at all and allowing questions over its involvement in the melamine scandal to fester.


What has Fonterra learned?

January 23, 2009

What would Fonterra have done differently before investing in China if the company could have foreseen the melamine poisoning which killed at least six babies, poisoned tens of thousands of others and has led to the chair of Sanlu, Tian Wenhua,  being sentenced to life imprisonment  and two men who supplied melamine being sentenced to death?

The answer to that hypothetical question probably doesn’t matter.

But what Fonterra has learned from the experience does matter  if the company has any thoughts of investing in China in the future.

It’s a vast country with a very large population which means there are big opportunities for investment, but the Sanlu experience shows there are also huge risks.


White gold tarnished

January 8, 2009

At the start of last year sheep and beef farmers looked enviously at the returns dairy farmers were enjoying and aimed to get prices for meat, wool and other by-products which matched those from milk.

The gap between sheep and beef returns is closing on those from dairying but that owes more to the fall in the price of milk than improved prices from cattle and sheep.

Fonterra has already announced a drop from its opening forecast of $6.60 a kilo of milk solids for the season to $6 and is expected to announce a further fall at the end of the month.

The average price the company got at its internet auction  on Tuesday was $US2017 ($NZ3420) per tonne which was 9.3% less than the average in December.

The only glimmer of hope is a small rise in spot prices which might indicate prices are reaching the bottom of the cycle but that’s small comfort when the global price for milk, which peaked at the end of 2007, has fallen sharply  since September last year. 

dairy-11

dairy-10001

The state of global commodity markets isn’t the only problem facing Fonterra which just 12 months ago was being held up as the example the sheep industry should follow as the benefits from the white gold flowed through rural communities and into the wider economy.

The on-going fallout from its investment in Sanlu, one of the company’s hardest hit by China’s poisoned milk scandal continues. Sanlu was declared bankrupt  by a Chinese court on December 24th and the way the company has handled the issue doesn’t give me any confidence that it has learnt enough to ensure success in any future investment in China.

However, the financial losses from the Sanlu investment have already been taken into account and disappointing as Fonterra’s payout is expected to be it’s unlikely to fall as far as that of Westland Dairy Co-operative. It’s  reduced its forecast payout   for the season from the $5.20 to $5.60 a kilo of milk solids announced in November to $4.10 to $4.50.

Making matters worse is Westland’s decision to backdate the forecast meaning suppliers have to pay back money already received.

The reduced payout will mean suppliers will receive $180 million less than expected.

To bring that down to an individual farm: the owner of a 350-cow herd received $90,000 for his milk from Westland last month and had budgeted on getting $120,000 for January but is now expecting just $30,000.

Lincoln University professor Keith Woodford  said that given Westland’s position that Fonterra is unlikely to to achieve a payout of more than $5.

Westpac economist Doug Steel has a more positve view and thinks Fonterra could still achieve a $6 payout.

However, the company could do well to follow the advice given to politicians to under promise and over deliver because a lower forecast might help to stabilise or even reduce some of the production costs which rose further and faster than last season’s record payout.

The whitegold has tarnished but most commentators are still confident that the longterm outlook for dairying is positive for those who are able to farm there way through the current lower returns.

Established farmers with good equity will be disappointed by the drop in income and may have to tighten their belts but it shouldn’t threaten their businesses and they’ll be helped by the fall in interest rates and the cost of fertiliser and fuel.

Those most at risk are the ones who have just converted or are in the process of converting for next season who bought land and stock at peak prices; and sharemilkers who bought cows in the middle of last year when values were highest.

However, while the payout obviously has a big impact on financial performance it’s not the only factor to affect profitability.

A speaker at a SIDE (South Island Dairy Event) conference a couple of years ago said he’d had a better result for the year when the payout fell to $3.60 than he had the previous season when it was above $5 because he’d kept a tighter rein on costs when the payout was lower.

P.S. – Cactus Kate, Macdoctor  and Inquiring Mind have posts on Fonterra and Sanlu; and Fran O”Sullivan  is not impressed by the way the company has handled the issue.


6 Chinese babies dead & 300,000 sickened by melamine milk

December 3, 2008

China has admitted that six babies died and 300,000  became ill after drinking milk made from powder which had been poisoned by melamine.

The scandal has been met with public dismay and anger, particularly among parents who feel the government breached their trust after their children were sickened or died from drinking infant formula authorities had certified as safe.

The Health Ministry’s revised death toll is twice the previous figure, while the new count of 294,000 babies who suffered urinary problems from drinking contaminated infant formula is a six-fold increase from the last tally in September.

“Most of the sickened children received outpatient treatment for only small amounts of sand-like kidney stones found in their urinary systems, while some patients had to be hospitalized for the illness,” the ministry said in a statement late Monday.

The latest statistics show that China’s communist leaders are slowly acknowledging the scale of China’s worst food safety scare in years. During such crises, the government often deliberately releases information piecemeal in part to keep from feeding public anger.

Thousands of parents have been clamouring for compensation for their sickened and dead children. The release of the figures raises the question of whether the Health Ministry is getting closer to finalizing a compensation scheme.

“The new figures are more realistic and objective than previous figures. We knew the previous ones could not have been accurate,” said Chang Boyang, a Beijing lawyer who has provided legal assistance to families of children who became ill.

Six deaths from such a serious and widespread problem still seems very low, although at least it is an indication that authorities are being more open about the scale of the scandal.

Morning Report said that Sanlu, one of the companies most badly affected  by the poisoning, has begun selling milk powder again and that people are accepting reassurances that it is safe.

Fonterra, which has a 40% stake in Sanlu, announced a 60 cents reduction in its forecast payout for this season, partly because of losses associated with the melamine scandal.


%d bloggers like this: