Freeland’s 2023 federal budget, released Tuesday, includes $13 million in 2023-24 for Agriculture and Agri-Food Canada to temporarily increase the interest-free limit for loans under its Advance Payments Program (APP) to $350,000 for the 2023 program year.

The interest-free portion of an APP loan was previously capped at $100,000 but that level was temporarily raised last summer to $250,000 for the 2022 and 2023 program years.

The APP provides farmers with cash advances of up to $1 million, based on up to 50 per cent of the anticipated market value of a farm’s eligible production, whether it’s still to be produced or is already stored.

“Farm production costs have increased in Canada and around the world, including as a result Russia’s illegal invasion of Ukraine and global supply chain disruptions,” Tuesday’s budget documents said. “It is important that Canada’s agricultural producers have access to the cash flow they need to cover these costs until they sell their products.”

On that note, the budget also committed the feds to “consult with provincial and territorial counterparts to explore ways to extend help to small agricultural producers who demonstrate urgent financial need.”

Fertilizer funding

On the matter of input costs, the budget also notes Russia’s invasion of Ukraine “has resulted in higher prices for nitrogen fertilizers, which has had a notable impact on eastern Canadian farmers who rely heavily on imported fertilizer.”

To that end, the budget proposes a $34.1 million addition to the federal On-Farm Climate Action Fund over three years, specifically “to support adoption of nitrogen management practices by eastern Canadian farmers, that will help optimize the use and reduce the need for fertilizer.”

That $34.1 million figure roughly coincides with a recent estimate of the tariffs collected so far on imports of Russian fertilizer into Eastern Canada. Several grower groups in that region have called for an end to that tariff and for farmers to be directly reimbursed for tariffs already paid.

Dairy development

Among other longer-term investments, the budget proposes $333 million over 10 years to set up what it calls the Dairy Innovation and Investment Fund, starting in 2023-24, to back development of new dairy products based on solids non-fat (SNF), a dairy processing byproduct.

The dairy sector is up against “a growing surplus” of SNF, for which the limited processing capacity in Canada “results in lost opportunities for dairy processors and farmers,” the budget said.

The new fund would support “investments in research and development of new products based on SNF, market development for these products, and processing capacity for SNF-based products more broadly.”

Inoculation inventory

The budget also pledges $57.5 million over five years starting in 2023-24, and $5.6 million ongoing, for the Canadian Food Inspection Agency to set up a foot-and-mouth disease (FMD) vaccine bank for Canada and develop FMD response plans.

Recent outbreaks of FMD in livestock in Asia and Africa “have increased the risk of global spread,” the budget said, and if an FMD outbreak were to occur in Canada it “would cut off exports for all livestock sectors, with major economic implications.”

The impact of a potential FMD outbreak “would be significantly reduced with the early vaccination of livestock,” the budget said. For the vaccine bank, the feds plan to “seek a cost-sharing arrangement with provinces and territories.”

The Canadian Cattle Association on Tuesday hailed the vaccine bank announcement, describing a vaccine bank as a “critical” investment which “helps provide necessary insurance to protect Canada’s export markets.” Several livestock groups have called for such an investment in recent years.

“While we hope this vaccine bank is never needed, we are grateful for today’s investment and its establishment,” CCA president Nathan Phinney said in a separate release. “We appreciate the government listening to our concerns and understanding the critical need to put in place emergency preparedness plans to control the spread of the disease and protect our export markets for Canadian beef.”

Risk management

CCA also hailed a separate budget line item pledging $184 million over three years to boost the Species At Risk Act. That funding goes to the federal environment, parks, fisheries and natural resources departments “to continue monitoring, protecting and promoting the recovery of species at risk to help restore their populations.”

“We will be engaging with the government of Canada to ensure beef producers are at the table as key stewards of lands where species at risk live,” the CCA said.

On that matter, noting cattle producers’ stewardship work on endangered native grasslands, Phinney said the CCA calls on Ottawa “to include support for protecting Canada’s grasslands in the future.”

Liquor and cannabis

Among federal sin taxes, the feds propose to temporarily cap the inflation adjustment for excise duties on beer, spirits and wine at two per cent, for one year only, as of April 1. Alcohol excise duties are usually automatically indexed to total Consumer Price Index (CPI) inflation at the beginning of each fiscal year.

The feds also announced plans to allow all licensed Canadian cannabis producers to remit excise duties on a quarterly basis rather than a monthly basis, also starting April 1. That move expands on a measure put in place for “certain smaller” cannabis producers in the 2022 budget.

On that note, the budget said, “while significant progress has been made in eliminating criminal activity in the cannabis market, licensed cannabis producers are currently experiencing financial difficulties as they help to build a stable, legal cannabis industry in Canada.” — Glacier FarmMedia Network

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Canada in May published revisions of its TRQ allocation policies after a January ruling by a dispute settlement panel under the Canada-U.S.-Mexico free trade agreement (CUSMA) — the first such dispute to be heard since CUSMA took effect in 2020.

The January ruling had found Canada was violating CUSMA rules by reserving most of its TRQs for Canadian processors. The new policies Canada published in May were intended to “end the use of processor-specific TRQ pools,” Canada’s Trade Minister Mary Ng said at the time.

Canada’s supply management system for dairy farmers relies on a tariff wall that effectively limits imports from the U.S. and elsewhere. CUSMA, which was expected to improve U.S. dairy producers’ market access to Canada, maintains Canada’s right to 14 dairy-related TRQs on products including milk, cream, ice cream, milk powders, cheeses, condensed milk, yogurt and buttermilk, among others.

A TRQ is a trade mechanism that allows an agreed-upon amount of a specified product to be imported with low or no duties. Beyond that amount, a different and usually higher duty is applied.

Importers who want to use the U.S. product can seek an allocation that allows them to bring in up to a certain amount under the TRQ, after which their imports would be subject to the higher over-quota duty. Thus, if an importer is granted an allocation for, say, 100,000 kg of U.S. cheese under a TRQ, he or she can bring it all in at once or draw down on his or her allocation in portions over the course of a calendar year.

The week after Canada’s revised dairy TRQ rules were published in May, U.S. Trade Representative (USTR) Katherine Tai’s office said it would seek trade consultations a second time, arguing that the new TRQ rules still keep some eligible applicants, such as retailers and foodservice operators, from getting TRQ allocations.

Now, however, the USTR and U.S. Department of Agriculture said Tuesday, “since initiating those consultations, the United States has identified additional areas of deep concern, and this new request for consultations provides an avenue to formally address U.S. concerns” — after which the U.S. said it may seek another CUSMA dispute panel if its concerns aren’t addressed.

‘Ring-fencing’

Canada’s revised TRQ policy still denies access to allocations for “all types of importers except for processors, distributors, and, in some cases, further processors,” USTR and USDA said Tuesday.

But they said “additional aspects” of Canada’s TRQ allocation measures are also inconsistent with Canada’s CUSMA obligations.

Canada, they said, allocates its product-specific dairy TRQs based on a calculation of an applicant’s market share, and the math used to do so differs depending on the type of applicant, “which has the effect of ring-fencing large shares of the quota and limiting access to those shares exclusively to processors.”

Canada also requires that applicants “be active during all 12 months of a 12-month reference period, potentially excluding otherwise eligible applicants, in particular new entrants,” the agencies said.

Also, Canada’s “turnback” policy, for the return and reallocation of unused allocations, now allows for the return of allocations without potential penalty and late in the TRQ year, USTR and USDA said.

Specifically, USTR said in Tuesday’s request for consultations, Canada allows for allocation holders to return their unused allocations without penalty for the first eight months of a TRQ year.

Which means, the U.S. agencies alleged Tuesday, that there’s no mechanism for unused quota allocations to come back for reallocation in a “timely and transparent” way that allows the “greatest possible opportunity” for a TRQ to be filled.

“Rather than work toward meeting its obligations, Canada persists in implementing new dairy policies that are inconsistent with (CUSMA), and which continue to deny U.S. workers, farmers, producers, and exporters the full benefits of market access they were initially promised,” Tai said Tuesday.

“Canada remains in violation of its commitments under (CUSMA) by not removing its trade restrictions on American dairy producers,” U.S. Agriculture Secretary Tom Vilsack said in the same release.

Ng, in a statement Tuesday, replied that dispute settlement panels “have confirmed that our supply management system is in line with our international trade obligations. The terms that we negotiated under (CUSMA) are being respected and upheld.”

The Canadian government, Ng said, “look(s) forward to demonstrating how Canada is meeting its CUSMA obligations during the new consultations on allocations of dairy tariff rate quotas.” — Glacier FarmMedia Network

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The co-operative said June 17 it will invest $34 million in the former Scotsburn plant at Truro, to “redefine the space within the plant (and) support the development of several business opportunities for Agropur, especially in a growing market.”

Specifically, the capital investment will go to “allow the creation of a new extrusion line for value-added innovation in the premium novelties segment.”

The Truro plant will then become one of Agropur’s “centres of excellence for extrusion-type frozen products,” the co-op said.

In the frozen novelties business, extrusion is used to produce various figures or shapes, which can then retain those forms during later handling and further-processing.

Jeannie van Dyk, the Agropur board’s vice-president, described the move as “the largest plant capital investments made in Canada for the last five years,” adding it “confirms the importance of the Atlantic region for Agropur and our commitment to remain a major player in the region and to pursue the opportunities it presents.”

“The Truro ice cream plant is known for its expertise in dairy processing and the production of frozen treats, and we are very pleased to be able to innovate in this area. Several new projects will be possible because of this investment,” Dominique Benoit, Agropur’s senior vice-president for institutional affairs, said in the same release.

Agropur’s plans to invest in new frozen dairy products for Canada follow an announcement in April from the Canadian arm of food processor Unilever, with similar plans to expand the frozen dessert portfolio it produces at Simcoe, Ont.

Other companies, however, such as French yogurt maker Danone, have recently said they plan to pare back the number of varieties available in their product lines.

The ice cream plant at Truro came to Agropur in 2017, when it bought Scotsburn Co-operative Services — a deal which also included a frozen desserts plant at Lachute, Que. Agropur closed the Lachute plant in 2020 and shifted that site’s work to its other facilities. — Glacier FarmMedia Network

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The U.S. Trade Representative’s office claimed victory for Washington in the first dispute settlement panel ever brought under the Canada-U.S.-Mexico Trade Agreement (CUSMA) that took effect in 2020. Canada said the report found “overwhelmingly” in its favour.

At issue in this case is Canada’s practice of reserving 80-85 per cent of the volume of its dairy tariff rate quotas (TRQs) — specified quantities of products from ice cream to cheese that can cross the border at lower or zero tariffs — for import by Canadian processors.

The United States requested creation of the dispute panel on May 25 after failing to resolve the issue in bilateral consultations with Canada. The panel issued its confidential findings to the parties on Dec. 20 and released them publicly on Tuesday.

In its 50-page report, the panel concluded, “Canada’s practice of reserving TRQ pools exclusively for the use of processors is inconsistent with Canada’s commitment in Article 3.A.2.11(b) of the Treaty not to ‘limit access to an allocation to processors.'”

U.S. Trade Representative Katherine Tai said the “historic win will eliminate unjustified trade restrictions on American dairy products, and will ensure that the U.S. dairy industry and its workers get the full benefit of (CUSMA) to market and sell U.S. products to Canadian consumers.”

Canada’s Trade Minister Mary Ng and Agriculture Minister Marie-Claude Bibeau, in a statement Tuesday, said they’ve “taken note of the panel’s finding regarding Canada’s practice of reserving TRQ pools for the use of dairy processors” and will work “closely” with the dairy industry on next steps.

U.S. producers exported US$478 million of dairy products to Canada from January through October, according to U.S. data. It was not immediately clear how much the volume could increase as a result of the panel’s finding.

The senior U.S. official said the United States expected Canada to resolve the issue by a deadline of Feb. 3 and its goal was not to impose retaliatory measures but it had the right to do so if Ottawa did not remove the restrictions.

“We will ensure compliance with the ruling which is overwhelmingly in Canada’s favour … Canada is seeing this (report) as a win in a lot of ways,” Alice Hansen, a spokeswoman for Ng, said Tuesday.

Hansen, speaking by phone, said it would be premature to discuss how Canada would ensure compliance.

U.S. farmers have complained that Canada’s supply management system hurts their ability to export to their northern neighbour.

Ng said in Tuesday’s statement the panel had “expressly” recognized the legitimacy of Canada’s supply management system, which sets production quotas and high tariffs to support prices of dairy, poultry and eggs.

— Reporting for Reuters by Andrea Shalal and David Ljunggren; additional reporting by Rod Nickel.

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DFC and Toronto-based, TSX-traded Pizza Pizza — which as of March 31 included 622 Pizza Pizza and 103 Pizza 73 outlets across eight provinces — announced Thursday the company will showcase DFC’s Blue Cow in select Pizza Pizza marketing campaigns nationwide.

The Blue Cow logo rollout began in Ontario this spring and will spread across all Pizza Pizza and Pizza 73 locations throughout Canada later this year, DFC said.

Upgraded to its current form in 2016, the Blue Cow is DFC’s symbol certifying products as made with 100 per cent Canadian milk and milk ingredients.

In this case, DFC said Thursday, the Blue Cow “assures Pizza Pizza’s customers that the mozzarella cheese topping they know and love is made with 100 per cent Canadian milk.”

The logo has been displayed on product labels and in campaigns by processors such as Agropur, Lactalis, Gay Lea, Organic Meadow, Fairlife and Bothwell Cheese, as well as by fast food chains such as McDonald’s Canada in a soft-serve ice cream campaign last summer.

In all, DFC said, the logo has been used by over 500 licensees, including about “three dozen” restaurant chains, on about 8,600 products.

“DFC looks forward to partnering with Pizza Pizza as it expands across the country, further supporting our commitments behind the Blue Cow that have made it one of Canada’s most trusted brands,” DFC president Pierre Lampron said in a release.

The logo, he noted, is recognized by “no fewer than nine out of 10” Canadians.

“Customers know the Blue Cow and now they can support Canadian farmers by grabbing a slice of their favourite pizza,” Adrian Fuoco, vice-president of marketing for Pizza Pizza Ltd., said in the same release.

Pizza Pizza, he said, is “a homegrown success story, enriching the livelihoods of over 700 local franchisees, and the Blue Cow reaffirms our strong ties to hardworking Canadian farmers and small business owners.”

The chain in recent years has built up backstories for several of its products and ingredients, billing its chicken products as coming from birds raised without antibiotics and fed all-vegetable-grain diets, and pizza dough made with 100 per cent Canadian wheat. It also committed itself to source egg ingredients from “100 per cent cage-free sources” by 2025.

The chain has also launched new products such as plant-based protein toppings and crust options such as a cauliflower-based crust and an “Uncrust” for keto dieters.

‘Food preparation’

The Canadian chain’s cheese sourcing hasn’t always been Blue Cow-grade, however.

Eight years ago, it was a sore spot with DFC and Canada’s provincial milk marketing boards, when the chain was found to be importing pre-packaged pizza topping kits combining shredded mozzarella and sliced pepperoni from the U.S.

The pizza kits at that time were classified for tariff purposes as a “food preparation” and thus weren’t subject to the tariff rate quotas (TRQs) imposed on dairy imports under Canada’s supply-managed dairy marketing system.

The dairy organizations at the time criticized the chain’s actions as “a blatant example of circumvention of the government’s tariff system” on cheese imports.

DFC and the provincial boards in 2013 tried to challenge the Canada Border Services Agency’s (CBSA) classification of the pizza kits at the Canadian International Trade Tribunal (CITT), but were rejected for lack of standing.

Later that year, the federal government plugged that loophole by requiring that the cheaper U.S. mozzarella in such kits be classified under the tariff lines for fresh cheese, regardless of their packaging.

The Canadian Restaurant and Foodservices Association, a longtime critic of Canada’s dairy pricing framework, criticized the federal government at that time for having “suddenly shut down a pizza cheese import process that the courts have twice upheld.”

Deliveries up

In its year-end financials in early March, Pizza Pizza reported overall system sales of about $488.3 million for the year ending Dec. 31, down from $553.5 million in 2019.

Same-store sales growth was down 12.5 per cent in 2020 from 2019 on the pandemic-related loss of walk-in sales and “non-traditional” sales such as those from its kiosks at sports and entertainment venues.

However, the company noted an increase in delivery sales at its Pizza Pizza and Pizza 73 stores alike, which “partially offset this reduction.” — Glacier FarmMedia Network

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The CDC on Monday announced the farm gate price of milk will increase by $1.46 per hectolitre (100 litres) effective Feb. 1, 2021, pending approval by provincial dairy authorities early next month.

“This year, because of various factors such as the COVID-19 pandemic, the usual pricing formula was not applied,” the commission said in a release.

“The rise in producers’ revenues will partially offset losses incurred due to the COVID-19 pandemic and market trends which have caused revenues to remain below the cost of production.”

That increase is expected to translate to a two per cent increase in the price for milk used to make dairy products for the retail sector and the restaurant industry, the CDC said.

The CDC rendered its decision on the price adjustment of milk based on its own consultations, as it’s allowed to do “under certain conditions” for a given year in which an industry stakeholder asks that the formula not be applied.

The CDC said Monday it won’t change its butter storage fees, which it charges for its storage of a “certain quantity” of butter to guarantee adequate supplies throughout the year and prevent shortages.

That said, the commission added that it recognizes a two per cent increase in butter processing costs, which apply to the butter manufacturers sell to the CDC “in the context of its storage programs.”

To reflect that increase, the CDC said Monday, its support price for butter used in its storage programs will increase effective Feb. 1, to $8.7149 per kilogram from the current $8.5524, itself down 5.1 cents from the adjustment made Feb. 1 this year.

The support price is the price at which the CDC buys and sells butter through its domestic seasonality program, to balance seasonal changes in demand in Canada’s supply-managed domestic market. Provincial marketing boards also use that price as a reference point in pricing industrial milk.

How these adjustments ultimately affect retail prices will depend on “many factors,” the CDC said, such as manufacturing, transportation, distribution and packaging costs.

However, the commission said, “it should be noted that the consumer price index for dairy products has risen by only two per cent since 2015, whereas the index for food in general has risen by 10 per cent.” — Glacier FarmMedia Network

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Trudeau, who over the last year has faced increasing criticism for backtracking on promises, ordering endless consultations on major topics and failing to fulfill many of his campaign promises, had taken a tougher stance against the U.S. in recent weeks.

Trudeau, facing elections in 2019, said on Sunday that Canada “will not be pushed around,” triggering a fierce attack from Trump and his advisers, one of whom apologized on Tuesday.

Trump is particularly incensed by Canadian tariffs imposed on dairy products, which he says are “killing” U.S. farmers, especially in Wisconsin.

He and other U.S. politicians have long demanded Canada’s system of domestic dairy protections either be abolished or heavily modified to give U.S. exports a bigger share.

But Trudeau has little room for manoeuvre. Dairy farmers, who number about 11,000, have an outsized influence in Canadian politics, being concentrated in the vote-rich provinces of Ontario and Quebec.

Trudeau meets on Tuesday with the Dairy Farmers of Canada, which suspect he might be ready to sell them out.

Canada’s dairy sector is heavily sheltered under a government system, set up in the 1970s, which controls how much they produce but also sets prices above those in the U.S. for domestic consumers.

The dairy system, or supply management as it is known, falls outside of the North American Free Trade Agreement.

Canada’s parliament unanimously condemned the personal attacks on Trudeau on Monday, as the famously polite nation simmered over the U.S. weekend broadsides.

“I think it is good for him in the short term. The longer term is not nearly as clear,” said Ekos pollster Frank Graves. “Trade wars are never good for the respective combatants and if this escalates it could have very deleterious economic impacts.”

Trudeau’s Liberals are currently tied with the main opposition Conservatives in polls. A trade war, and the resulting massive job losses, would be a political failure for the 46-year-old prime minister who came to power in late 2015 promising to improve ties with Washington.

He could mitigate the damage by offering aid packages to affected industries although the bill would most likely run into many tens of billions of dollars.

Trudeau says Trump’s demands are in part linked to talks to update NAFTA. Trump, who has frequently threatened to walk away from the pact, is now threatening tariffs on auto imports.

People close to the prime minister reject the suggestion he misread Trump and cite what they say is the president’s highly unpredictable nature.

“Even if we gave him everything he wanted — and there is no way we would ever do that — who can say whether he’d be satisfied?” said one source, who declined to be identified given the extreme sensitivity of the situation.

Trudeau — who links the tariffs to the NAFTA talks — declined to comment on Trump’s latest attacks on Tuesday, saying he would focus on protecting Canadian jobs.

Among the many uncertainties is how far Trump is prepared to match his tough words with action.

“When it comes to Trump tweets there’s a discount premium to them,” said Carleton University professor and foreign policy expert Fen Hampson, who advises Trudeau to “hunker down, say nothing, not rise to the bait.”

Hampson noted that former Canadian prime minister Brian Mulroney, who pressured Washington for years on the need for a treaty to curb acid rain, only succeeded when George H.W. Bush replaced Ronald Reagan as president.

Assuming Trump will be gone soon may not be a wise game plan. Under one scenario being studied by Canadian officials, he wins the next election and stays in power until 2025.

— Reporting for Reuters by David Ljunggren in Ottawa; additional reporting by Roberta Rampton in Washington.

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Health Canada launched consultations in February for its proposed new front-of-packaging labeling. The proposal, part of Health Canada’s Healthy Eating Strategy, would include new warning labels on the fronts of products sold in Canada for foods that are high in saturated fats, sugars and sodium.

“Our concern is that many Canadians would actually put that product back down if they see a warning label on it. So it would impact our markets domestically,” David Wiens, chair of Dairy Farmers of Manitoba (DFM), said Wednesday at Headingley, Man. during one of the group’s four spring meetings.

Wiens said he has heard such a proposal could negatively impact the Canadian dairy industry by as much as $800 million.

While milk would get a pass from the proposed labels, other dairy products such as cheeses and yogurts will not, which has the Canadian dairy industry concerned.

“It’s intuitively wrong where you would have nutrient-dense foods that Canadians rely on for (their) healthy eating strategy, would now come with warning labels,” Wiens said.

Under the Health Canada proposal, he said, many dairy products would fall into the category of being too high in sodium or saturated fats. For example, sodium is used in the aging of cheese.

Products such as flavoured milks and yogurts would also see labels placed on them, but products like soda with aspartame would not.

“It’s a rather simplistic way and what they’re doing then is they’re ignoring the level of essential nutrients that these nutrient-dense foods that are dairy contain, because they’re simply focused on those bottom three.”

Health Canada, in a release, cited research that Canadians consume “too much” of these nutrients, with eight out of 10 Canadians consuming too much sodium and “almost one in two” Canadians eat too much saturated fat.

Dairy Farmers of Canada (DFC) has been lobbying against the proposals stating the science doesn’t make sense. According to Wiens, research completed by DFC and partly funded by the federal government has been dismissed, as Health Canada has said it is biased.

There have been outside voices speaking out against the proposals, including Dr. Andrew Samis, general surgeon and critical care specialist at Quinte Health Care at Belleville General Hospital in Ontario.

According to Wiens, Dr. Samis has said if the new labelling is implemented, he could have patients buying products he has recommended for them with labels saying such products aren’t good for them.

“That’s the concern that’s being raised by people like that… I’m at least hoping they’re having some impact about getting the message out (that) Health Canada really needs to rethink their healthy eating strategy here,” Wiens said.

DFM members at the meeting were encouraged to speak out against the front-of-package labelling plan and to visit KeepCanadiansHealthy.ca for more information.

Health Canada’s consultation runs until April 26.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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The P5 dairy farm boards, representing Quebec, Ontario, New Brunswick, Prince Edward Island and Nova Scotia, announced the quota increase Friday.

The one per cent increase in producer saleable quota is effective Nov. 1.

One incentive day per month — the ability to sell one additional day worth of milk, based on a dairy farm’s current quota — was issued for each month from November until March.

The quota is not cumulative, meaning that there is only one day for each month.

The industry has set a goal of 35,000 tonnes of butter in stock, which has not yet been met.

Organic farmers also got a significant boost in milk-producing potential, but they will have to wait for a while for it to kick in.

Organic dairy farmers will have three incentive days per month from April 2018 to March 2019. The incentive days will not be cumulative.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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The bust, which initially took place in March, uncovered the gang who had cut 276 tons of expired dairy goods into small packages to resell at cut-price rates for use in the baking industry, the Shanghai Municipal Food and Drug Administration said.

China is trying to improve a poor record on food safety, which has seen scandals from decades-old “zombie” meat to recycled “gutter oil” for cooking. The dairy sector is particularly sensitive after milk tainted with the industrial chemical melamine led to at least six infant deaths in 2008.

A spokesman for Fonterra said the company supported the action taken by Chinese authorities and that it believed the case was a one-off.

“We support the enforcement steps taken by Chinese officials. While we believe this is an isolated criminal incident, we are reviewing the case internally,” spokesman Phil Johnstone said in comments emailed to Reuters.

“Food safety is our top priority and we are committed to providing safe and high quality dairy products.”

Fonterra is one of the biggest suppliers of dairy to the Chinese market, but issues of over-supply and high inventory levels have pushed down prices and led some producers in China to dump stock.

New Zealand accounted for 40 per cent of China’s imports dairy products during the first seven months of this year, official China customs data show. China imported 550,000 tons of dairy products in that period, an increase of over 27 per cent year-on-year.

— Reporting for Reuters by Jackie Cai in Shanghai and Charlotte Greenfield in Wellington; writing by Adam Jourdan.

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