May 21, 2013

Chinese authorities have ordered infant milk formula producers to comply with the new testing, which is proving costly for dairy exporters.

The testing comes as China cracks down on any contamination, like the fertiliser DCD used on New Zealand dairy farms. One infant milk formula packer in Australia, Milk Powder Solutions, based in Melbourne, says the extra cost is more than 10% of the value of a container.

Owner Simon Hansford says Chinese health regulations have been getting stricter. "Per container it's going to add about US$40,000. They are asking us to test, and everyone else, every container. Once you have a history, I think they will soften that regulation. And we've got some good relationships in the port of Beijing."

Fonterra has already made statements to the Chinese saying its dairy products are safe and that only minute traces of DCD were found in some dairy products. DCD is a nitrate inhibitor used by New Zealand dairies to reduce nitrate in fertilisers leaching into waterways.

Meanwhile, a new business producing infant milk formula in Victoria's Gippsland says it wants to be the biggest formula maker in Australia.

The company, Funton, owned by Chinese Australian Dajiang Li, has been renovating the old Bonlac dairy factory at Toora. It is an US$80 million investment and aims to produce US$120 million worth of infant milk formula per year within three years.

General manager Graham Coall says it is preparing to open next month. "It's quite an aggressive development programme. We are the new people on the block. Our ambition is to meet Tatura (owned by Bega), then exceed them, using the advantage of new technologies. Like Murray Goulburn, Tatura, they're all good producers but their equipment is ageing."