Dairy scare gives opening to India

New Zealand's loss could be India's gain as the world's biggest milk producer hopes to seize on a dairy product contamination scare to increase its market share in China and other emerging Asian countries.

The New Zealand cooperative Fonterra, the world's biggest dairy exporter, said last week that a dirty pipe in one of its processing plants may have tainted whey protein with a bacteria that causes botulism, a paralytic illness. The news prompted recalls in China, Vietnam, Sri Lanka, Thailand and New Zealand.

Fonterra said yesterday that the contamination scare was caused by human error, and all tainted stocks had now been taken out of the market.

Theo Spierings, the chief executive, said there was now little or no risk to consumers.

Dairy accounts for about a quarter of New Zealand's exports.

India's milk production is likely to rise almost 5 per cent in the year to next March to 133 million tonnes, said R G Chandramogan, the managing director of Hatsun Agro Products, one of the country's leading milk powder exporters.

Traditionally, most of that production stays at home, but with domestic demand pegged at about 128 million tonnes, there should be more milk available to make skimmed milk powder (SMP) for export. The Indian government also usually restricts overseas sales to keep a lid on local prices.

India expects its SMP exports to jump by more than half to 100,000 tonnes this year, said RS Sodhi, the managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), India's top milk product exporter and the owner of Amul, the nation's best-known milk and dairy products brand.

Amul-branded products will not be appearing in Chinese supermarkets just yet - Indian supplies will go to milk product makers who then use their own packaging. GCMMF expects to ship 25,000 tonnes of SMP this year five times last year's levels.

"This year there is no [export] restriction and market conditions are better," said Mr Sodhi.

Nearly 90 per cent of China's US$1.9 billion in milk powder imports last year originated in New Zealand. India's milk product exports are tiny in comparison - just $230 million last year, mainly to South Asian countries and the Middle East. India only felt comfortable enough with its domestic supplies to lift an SMP export ban in June 2012.

* Agencies