Stock price falls for dairy amid massive China recall

Updated Tue. Sep. 23 2008 6:39 AM ET
The Associated Press
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080922/china_milk_080923/20080923?hub=World
BEIJING --
The stock price of a company at the centre of China's tainted milk product scandal plunged Tuesday as the government pledged to crack down on an "out of control" milk-gathering system.
Tainted baby formula has sickened nearly 53,000 Chinese infants and has already cost the head of the country's food safety watchdog his job. Four deaths have been blamed on the contaminated milk powder.
One of China's biggest milk producers, China Mengniu Dairy Co., saw its stock price plummet slightly more than 60 per cent in Hong Kong trading Tuesday after its products were found tainted with the industrial chemical melamine.
Mengniu, China's No. 1 dairy producer in total volume, said only that a small portion of its products were contaminated and blamed the contamination on "the illegal acts of some irresponsible milk collection centres and raw milk dealers."
"The board wishes to sincerely apologize for the incident and any inconvenience caused to the public," the company said in a statement to the Hong Kong stock exchange.
Melamine, used to make plastics and fertilizer, has been found in infant formula and other milk products from Mengniu and 21 other Chinese dairy companies. Suppliers trying to cut costs are believed to have added it to watered-down milk because its high nitrogen content masks the resulting protein deficiency.
It is not known where in the milk supply chain the melamine was added, but Agriculture Minister Sun Zhengcai told a meeting with the health and public security ministries late Monday that it may have been at the stations which collect milk from small individual farmers.
"Since milk stations began only in recent years, the country now has no specific method of supervising them, or a clear-cut supervision department. The purchasing process of raw milk is basically out of control," Sun said, according to a summary of his comments posted on his ministry's Web site Tuesday.
"We must crack down on them with the greatest determination and the toughest measures," Sun added.
The scandal has already led to numerous arrests and resignations, including that of Li Changjiang, who stepped down Monday as head of the General Administration of Quality Supervision, Inspection and Quarantine. He ran the safety watchdog since 2001 and his resignation comes a year after he and the government promised to overhaul the system in response to a series of product safety scares.
New regulations and procedures were introduced in an attempt to restore consumer confidence and preserve export markets after a string of recalls involving tainted toothpaste, faulty tires, contaminated seafood and in March 2007, pet food containing melamine that was blamed for the deaths of dogs and cats in the United States.
The number of sick children reported by the Health Ministry has jumped from 6,200 to nearly 53,000. Of those, 12,892 remain hospitalized, with 104 of them in serious condition. Another 39,965 children were treated and released.
The huge jump may have been because health officials combed through hospital records from May through August to trace the origins of the contamination.
Baby formula and other milk products have been pulled from stores around the country and Chinese dairy products have been recalled or banned in Japan, Singapore, Brunei, Malaysia and Hong Kong.
The Philippines joined that list Tuesday when Bureau of Food and Drugs chief Leticia Barbara Gutierrez banned all milk imports from China as a precaution. She said her office has no record of baby formula imports from China.
Taiwanese officials said they were conducting a sweeping food inspection to assure consumers that local milk supplies are free of chemical contamination.
In Canada, a dessert product and brand of instant coffee have been pulled from store shelves after their foreign importers said they may be contaminated with melamine. No illnesses have been reported so far, according to the Canadian Food Inspection Agency.