Dita De Boni: All eyes on powder profits

Illustration / Anna Crichton

What happens to NZ if China's mothers decide breast is best?

There has been much angst about the effect of dairy farming on New Zealand's ecosystems, and whether the industry does enough to ensure the health of the natural resources that underpin its success - now, and in perpetuity.

That's an open question, and here's another: will New Zealand milk powder be wanted "in perpetuity" by lucrative markets such as those in China?

Recently, there was more ambiguity about just how welcome Fonterra is in the Chinese market, when the country's Government announced it was investigating all foreign milk producers as a result of what it believed to be price fixing between two global food giants - Nestle (Wyeth Nutrition) and French monolith Danone, selling under the brand name Dumex.

The two giants, keen to retain their market share in an infant formula market worth more than US$15 billion ($19 billion), are "co-operating with authorities" and have announced they will be lowering their prices by 20 per cent.

In general, internationally produced milk powder sells for as much as three times the cost of domestic powder, so one imagines even taking a haircut won't cause the likes of Nestle and Danone to suffer too much lost sleep.

A range of foreign companies are attracting increased scrutiny from Chinese lawmakers, but it's milk powder that continues to pluck the heartstrings of consumers, many of whom have been frightened off domestic milk powder after a string of scares.

The melamine scandal five years ago was among the biggest of these, killing six children and ruining the kidneys of hundreds of thousands more.

According to Forbes.com, some domestic producers eager to cut costs have moved on from using melamine to boost the powder's protein level, and have instead taken to adding in carcinogenic matter from tanneries - leading to the dodgy product being labelled "leather milk".

International milk powder continues to fly off the shelves, at such a rate that various regional gangs have become involved in transporting and distributing large amounts of this most precious of white powders. It has also led to a surge in the popularity of "wet nurses" for the babies of wealthy parents - and even reports that some adult consumers are paying to imbibe mother's milk.

China said it wants domestic producers of milk powder to recapture their market share. The National Development Reform Commission has Fonterra in its sights alongside the other global producers, and it will be interesting to see just how the company can deflect the probings of Chinese authorities while maintaining a strong market position.

Of course, another way for the Chinese Government to reduce its citizens' reliance on foreign milk powder would be to invest in a programme to boost breastfeeding. At the moment, less than 30 per cent of Chinese women breastfeed their infants.

As a New Zealander concerned about this country's economic future, it seems almost unpatriotic to say it out loud, but if the meagre breastfeeding rate was doubled, the average Chinese family would have far less to fear from contaminated product, cynical authorities or price-gouging global food conglomerates.