GOOD CHOICE?: The world is asking whether New Zealand milk is safe to drink.

The decision to sit on the discovery of a toxic chemical found in consumer milk was as part of a "measured and effective response" that is now threatening to froth into a PR disaster for New Zealand.

New Zealand trading partners are demanding answers and global business media are playing up the tension over another potential milk tainting scandal, with the Wall Street Journal running a headline: "Is New Zealand milk safe to drink?"

The Washington Post, running a story from the Bloomberg wire service, said Fonterra and the Government were facing a "milk scare".

On Friday, dairy company Fonterra announced that it had found low levels of the fertiliser aid dicyandiamide (DCD) in dairy products. The tests were undertaken in September, two months before the Ministry for Primary Industries (MPI) was alerted.

That delay has caused Labour's trade spokesman, Clayton Cosgrove, to question whether such a decision could cause more widespread damage.

"In customer relations, perception is the truth. Where there is a vacuum, people will look at the media and what people have said and, more importantly, what they haven't said, and make their own assumptions."

Despite the tests revealing only "minute traces" of DCD residue in a small number of Fonterra products and posing no apparent health risk, the lack of information around the chemical has caused international players like Taiwan to panic. While there was no health risk, some countries have zero tolerance on adulterant in their food products.

The issue had become a "trade risk", said Greg Campbell, chief executive of Ravensdown, which manufactures DCD.

Taiwan's department of health asked its importers to investigate if their products have came from New Zealand pastures that have been using fertilisers containing DCD.

The China Post quoted director of the Department of Toxicology at Linkuo Chang Gung Memorial Hospital, Lin Chieh-liang, as saying high doses of DCD could irritate human skin, potentially cause dermatitis and may lead to liver damage.

That panic was sparked by a Wall Street Journal article which labelled DCD a "toxic" substance that could cause damage to New Zealand's $10 billion dairy industry. Farmers apply DCD to pastures to prevent the fertiliser byproduct nitrate from getting into rivers and lakes.

After the MPI was alerted, a working group comprising Fonterra, Ravensdown and fellow DCD producer Ballance Agri-Nutrients, along with Dairy Companies Association of New Zealand and staff from MPI, met discuss how to deal with the problem. "It was important to fully assess the situation and take a measured and effective response," a ministry spokesperson said.

Fonterra has said it chose not to disclose the chemical findings before launching its $525m shareholder fund last November because it wasn't "material" information. But Cosgrove said the public might read into that and think there was something to hide, he said.

Cosgrove was in government in 2008, when a melamine-milk contamination in China killed at least six infants, causing the collapse of its local partner Sanlu Group. He said "there was no politics in trade" but he was surprised that Trade Minister Tim Groser had not made any definitive statements about the DCD discovery. It was important to keep New Zealand's trading partners informed about the integrity of the country's food export products, he said.

Earlier this month the Government told Fonterra there would be a voluntary withdrawal of DCD products from the market.

Fonterra managing director co-operative affairs, Todd Muller, said he was "fully supportive" of this. He said the delay in making the discovery public was because the working group had been gathering information, sourcing scientific opinion, and conducting further testing.

Muller said that a 60kg person would have to drink more than 130 litres of raw milk or consume some 60kg of milk powder to reach the limit for an acceptable daily intake, and considerably more to have any health effects from DCD.

"Clearly, this would never happen."