Fonterra CEO flays O'Connor milk taint talk

Fonterra chief executive Theo Spierings has torn strips off Labour agriculture spokesman Damien O'Connor for, he says, endangering the whole of the New Zealand dairy industry with "drastic" allegations relating to traces of a benign chemical, DCD, found in some powdered milk.

Mr O'Connor issued a press statement alleging a cover-up of the DCD findings in September to allow the Fonterra Shareholder Fund float to occur unimpeded in November.

"If you do those allegations, you better come with some evidence," Mr Spierings told BusinessDesk. "What you are doing here is not just a Fonterra issue, it is a New Zealand issue. You are attacking your key sector of the country.

"I'm sorry. I get a little bit emotional about it. I don't like this kind of attitude," said the recently appointed Dutch ceo, who said Mr O'Connor risked undoing three days' intensive work, including Prime Minister John Key, with international investors and media.

The issue got out of control internationally when a Wall Street Journal article questioned the safety of New Zealand milk.

Mr Spierings is deeply offended by Mr O'Connor's attack, and scathing of WSJ's use of a local journalist he claims was "filling in for someone" to kick the issue into international prominence.

He defends Fonterra's process once it found DCD, a nitrate inhibitor used to curb greenhouse gas emissions from farming, in tiny quantities in milk powder last spring, saying the first thing considered was whether it got "a green tick on food safety".

It did. DCD levels were 100 times lower than standards in the European Union. In other parts of the world, no standards exist.

With a "dark green" tick on food safety, the company had "a little bit of time" for collective action with fertiliser companies, telling them they must either manage the DCD issue with farmers or have Fonterra tell farmers to stop using it in the meantime, while international standards were sorted out.

The manufacturers, Ballance Agri-Nutrients and Ravensdown, withdrew fertilisers containing DCD voluntarily, a fact not notified publicly until late last week.

"We are coming with answers and telling the truth," Mr Spierings says.

FSF units took a small hit early in trading, falling as much as 9 cents to $7.14, as international investors digested the information Fonterra sent on the issue.

The biggest risk for Fonterra would be if one country were to decide to impose even a brief, precautionary ban on milkpowder imports, which constitute a large proportion of Fonterra's $14.5 billion annual export revenues, says Andrew Bascand, managing director at Harbour Asset Management in Wellington.

"To date, there's been no market there's been that sort of reaction. Fonterra appear to be on the front foot handling it.

"The commentary from our Chinese agents says they feel comfortable with where are at."

Mr Bascand says any weakness in the FSF price caused by the issue would be seen by some investors as a buying opportunity.

The units were sold at IPO last November for $5.50. They listed at $6.60, and have risen above $7 since.

Mr Spierings rubbished Mr O'Connor's claim the DCD issue was hushed up ahead of the listing, the largest equity event in New Zealand stock exchange's history for at least a generation.

"If there had been a public health or safety issue, we would have disclosed," Mr Spierings says.

The range of elements being tested in milk was constantly expanding as testing was becoming more sophisticated. Where there was no public health risk, Mr Spierings argues against mandatory immediate disclosure because of the volume of disclosures that would create.

"We should not need to disclose in our whole business things we want to improve. It would get [to be] a zoo. We could not run the company."

(BusinessDesk)

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44 Comments & Questions

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No surprises there - Same Labour Party which buggered NZ's economy by aggressively and recklessly expanded the social welfare state in its last term in office.

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O'Connor is the son of a dairy farmer, a former director of Westland Dairy. He says it as he sees it and is well regarded for his honesty - such as his comment about the rigging of the Labour list at the last election "a gaggle of gays and self serving unionists". While I have little tine for the Labour Party and its hotch potch policies, I think before you right his comments off you should give him credit for past honest statements and see where this leads. I think there needs to be a serious investigation into the FSF non-disclosure in the prospectus.

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Just for fact's sake, Labour ran surpluses & prudent policies for the first two terms and didn't take the disastrous economic tack of liquidating assets -- our great earners, & a competitive advantage.

Undoubtedly, budgets have been hit by the global financial crisis & recession, but your blaming the "welfare state" while ignoring National's disastrous plans is naive.

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And duly wasted those surpluses in funding election bribes like interest-free student loans, Working For Families and a bloated public service, meaning when the recession hit, NZers were left with nothing but burgeoning debt. That's the reckless socialist legacy of Helengrad.

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What cr*p! It was billion dollar bailouts for failed business buddies and tax cut election bribes fôr the greedy minority that put us up cow s**t creek.

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Economic treachery is more clearly evident in asset sales and non-intervention in the manufacturing crisis than in whistleblowers alerting the world to filthy capatilists in NZ.

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The manufactured manufacturing non-crisis?
Is manufacturing special?
NZ has plenty of exporters coping with the current climate: perhaps "manufacturing" is dog tucker in a competitive world.

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Pick your cherries

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Does it not demonstrate that O'Connor is an idiot and lacks any sort of commercial or political nous - at the same time what does it say about the said "local journalist"??

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I hope Mr Spierings uses the full weight and legal might of Fonterra to bring Damien O'Connor to account, publicly.

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What do you expect from Labor ?

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It is exactly what you can expect from Labor, they lack the any logic in so much of the what they say. We will go broke if they ever get control.

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Spierings is spinning to make Fonterra look good. The fact is they didn't recognise the level of anxiety that any leaked / uncontrolled mention of a chemical presence in milk causes. They kept it quiet because they thought they could keep it quiet. When they should have front footed the issue from the start and been ahead of the sensationalist pack, even if that was going to dampen the share float enthusiasm a wee bit.

O'Connor isn't the one potentially damaging NZ's milk image. Fonterra was by being secretive. Perhaps they thought that negligible health risk meant negligible public perception risk. Well, hopefully, that's a lesson learnt. If it's a chemical with a funny sounding name, then come clean early and be up front about the lack of risk. Rather than keep it under wraps and have to go into damage control mode when it leaks out (and it will leak out eventually).

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O'Connor appears to be suffering from a bad case of 'foot in mouth' disease.

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You forgot. He is been led by a stuttering stammering idiot who yesterday wanted to build a four-bedroom house for 300K. Today he cannot even remember what he said yesterday.

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May I remind you that it is John Key who suffers brain fades and swoons under pressure. Remember?

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May I remind you that it is John Key who suffers brain fades and swoons under pressure. Remember?

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What Damien O'Connor lacks in common sense, he more than makes up for in stupidity.
The guy is a loose cannon.

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U rednecks sound like Chinese Communist Party apologists for dirty anything ... air, water, milk...

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This will be great case study material for the countries marketing undergraduates on how not to conduct public relations.

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Fonterra already know Labour will be our next Government and switching tactics to maintain their position in the political landscape.

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Funny reading the comments about O’Connor, fact is there is a chemical in our milk.
I understand that doesn’t mean much in a country with the 11 highest use of fertilizer in the world (255.5 kg per hectare, right behind China 255.6kg).
I for one would like to drink my milk untainted by a chemical which may or may not be safe (DDT was once widely used and we all know how this ended) so I am grateful to anyone who addresses such issues in public.
As a parting thought, why do we put chemicals on our land which we do not fully understand and therefore end up back on our tables?

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I am sure you will drink a swimming pool of milk in your lifetime. Even then this chemical should have a cumulative effect. Sorry this is a chemical. alright. Anyone know what effects it causes.

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It would seem that Fonterra is trying to manage a PR debacle. You are correct to point out that NZ has an unacceptable level of fertiliser and pesticide use. The fact that Fonterra has been caught gives NZ a slap in our "clean and green" face. The truth hurts.

I, for one, have given up dairy because it has caused MS in my wife and other allergies in my kids. Dairy is not a good deal for NZ in the long term.

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What else you get losers like Labour. They try to score a point on everything. Even from their own doing. They signed the contract for Novopay. If I am key I will call their bluff and ask them to fix the problem. Same here. Their talk can affect New Zealand economy. I hate to see New Zealanders put their trust in Labour again.

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The milk's got polluted. The rivers are polluted. The land is polluted. Face it, dirty dairiers. Change ur farm practices or s..t in ur own..um..wallets

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National OKd the Novopay go live. Duck n weave all u like Tory, the electorate will bloody your bully boy nose on this one.

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As an independent dairy exporter I can tell you this is very serious. I have spent the last few days taking concerned phone calls from our customers around the world. We don't need the likes of politicians like O'Connor trying to score cheap points off this serious situation. Just makes it even harder to defend the quality of our dairy products. We have had over $1.5 mil of orders put on hold since this PR disaster started. To put it in simplistic economic terms that is enough foreign earnings to pay for the import of more than 30 motor vehicles or a couple of hundred I-Phones. These things hurt everyone in NZ and not just those in the dairy industry.

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So you are saying that you know the chemical dicyandiamide and fully understand that the quantities found where save for human consumption, you understand how DCD is reacting with other substances in the body and what the long term effects are?

I guess, what you are really saying is, that as long as we all make money everything is fine.
The point is that it may be too late when “handled” and the fallout from that is a lot more than a couple of hundred I-Phones.

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If there are officially recognised safety levels of this chemical in European food safety standards (some of the most strict) then, yes, it means that the long-term effects are well known. The fact that the levels detected were less than 1% of the allowed levels tells us that it is scaremongering for the sake of cheap political points and journalistic entertainment rather than genuine cause for alarm.

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There were "safe" levels of DDT and thalidimide, too. Where are they today? "Safe" as defined by the government means "nothing".

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You have a point, Max, but this was always going to blow up after that melamine business.
There are plenty of other questions.
What was wrong on the 500 farms that were using this?
Greed and irresponsibility?
How did the other 11,500 dairy farmers manage without it?
And if 500 farmers could contaminate whole weeks of powder production, then what were the levels like in their raw milk?
If Fonterra is serious about protecting its brands and the NZ Inc brand, then what do you of the way it has handled this?
It is not as though this situation is without precedent in the dairy industry, as you well know.

But you have to laugh, or try to. It reinforces Fonterra's decision to not have an organic brand, eh? The demand would be too great and nobody would want the contaminated rubbish that passes for clean, green and fresh. :-)

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So Max , who should have drawn Fonterra's attention to the problem that they have created for all NZ food exporters?
Or do you think that Fonterra has handled this really well in view of the effect on NZ Inc?

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O'Conner may be an idiot - no disputing that. Track record seems to show that quite clearly. However, Fonterra are subsidized to a significant degree by the taxpayer (how much of our Ministry of Foreign/Fonterra Affairs is spent advocating for Fonterra globally?). I do not have a problem with this...but there are more people than dairy farmers in NZ.

Our tourism industry, our wine industry, etc, all rely significantly on our national brand. Fonterra do the minimum they have to in order to not wreck their own reputation at the environmental level (do you dispute that, Theo?). Whether it is this flashpoint, or another, sooner or later Fonterra will start to cost the rest of the economy dearly.

There have been more than enough smoldering fires now. We give the farmers their economic rents by creating a on-off scale exception to the Commerce Act... but we do not ask/demand anything back. Taking a long-term view, the impact of Fonterra on our national brand will be strongly negative. They need to address this.

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Why is it that since Fonterra got in bed with Chinese interests that our quality image has gone down the toilet?

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Because of the mismanagement by Fonterra.

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Because Fonterra doesn't give a toss about NZ Inc.; never did, never will.

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Don't you just love these politicians who put their mouth into gear without first engaging their pea-size brains?

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O'Connor may be an idiot, but poison in milk is a fact! Hiding this will do nothing for Fonterra's image in the long run. The industry needs to clean up its act if it is going to maintain its reputation.

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What poison? There is no suggestion DCD is a poison. In fact, it was being used by farmers who were trying to reduce their nitrous oxide emissions, a greenhouse gas. All this issue will do in the long run is set back action on climate change.

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Dairy industry apologists are out in force:-

" ...we were only trying to save the planet... "

Yeah, right!

So what about the single move by dairy farmers that would have solved the environmental problems without contaminating the milk?
Reduce the stocking rate and avoid high stock densities on pasture.
It's proven technology; scientifically inarguable.
The industry then won't need the nitrogen fertiliser, and the PKE, and the "dairy support" which all just enable nutrient overload on the soil, and consequent pollution of groundwater and waterways.

DCD is unnecessary - 11,500 dairy farmers weren't using it.

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Not wanting to offend, Farmer Brown, but your comments don't read like a farmer. What farming do you do?

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No offence taken.
Pastoral agriculture ; multi species(animals): hands on (24/7/365). Not much cropping these days.
Do you want to see my hands? :-)
Began working in the dairy industry for NZCDC in 1969.
In what way do the comments appear to those of a non-farmer?

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Farmer Brown, may your progeny be numerous.

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