Dairy contamination scare hits New Zealand's image
Exports to China put at risk by fears of tainted baby formula from milk producer Fonterra
New Zealand is finding that its greatest strength is also its Achilles' heel.
A contamination scare at milk-producer Fonterra Co-operative Group is jeopardising export ties with China, which this year overtook Australia as New Zealand's biggest trading partner. Dairy is the largest foreign exchange earner, accounting for 28 per cent of overseas sales in an economy where exports make up about a third of output.
"The events of the past few days are a stark reminder of New Zealand's increasing vulnerability to a single product and to a single export destination," said Doug Steel, an economist at Bank of New Zealand.
"Any lingering major concern about the quality of New Zealand's food production could have far-reaching economic implications."
The nation's currency fell to a one-month low after Fonterra, the world's largest dairy exporter, said on August 3 that a dirty pipe at a processing plant may have tainted whey protein used in baby formula with botulism-causing bacteria.
