China Modern Dairy Plunges as Government Probes Cow TB

Chinese authorities are probing reports a unit of China Modern Dairy Holdings Ltd. sold milk cows that tested positive for tuberculosis, the latest food scandal to hit the country, sending shares of the raw-milk producer to the lowest in more than a year.

The reports alleged several of 94 dairy cows sold by the subsidiary in an auction tested positive for bovine TB, while some tested positive to a brucellosis antibody serum test, Maanshan, Anhui province-based Modern Dairy said in a statement to the Hong Kong Stock Exchange. Humans can contract TB by drinking unpasteurized raw milk from infected cows.

China’s dairy industry has struggled to regain consumer confidence since a melamine-tainted milk scandal that killed six infants and sickened 300,000 others in 2008. Chinese consumers have been hit by abuses that included fox DNA found in donkey meat sold by Wal-Mart Stores Inc. and a McDonald’s Corp. food supplier repackaging expired meat.

“This is an isolated incident and not an epidemic by any stretch of the imagination,” Jeremy Yeo, an analyst at Mizuho Securities, wrote in a note to clients, citing a conference call with Modern Dairy today. It won’t lead to a massive product recall as milk pasteurized under high heat kills such germs and bacteria, making it safe for drinking, Yeo wrote.

Sick cows aren’t allowed to produce milk for commercial use, he said, citing the company.

Infected Cows

Modern Dairy doesn’t need to recall any products due to the incident, Kevin Wong, a Hong Kong-based spokesman for the company, said by phone. He declined to comment further.

Modern Dairy fell 8.5 percent to HK$2.80 at the close of trading in Hong Kong, the lowest level since September 2013. China Mengniu Dairy Co., China’s second-largest milk company which owns 28 percent of Modern Dairy, fell 1.8 percent, while the benchmark Hang Seng Index gained 0.6 percent.

Modern Dairy’s Baoji Farm in western Shaanxi was found selling the infected cows, and the incident is being probed by police and animal health authorities from the provincial capital Xian, according to a report posted yesterday on the website of The Paper, which is affiliated with the Shanghai-based Oriental Morning Post.

“The incident will not have a material effect on the financial condition or the operation of the group,” Modern Dairy said in the statement, adding that it’s cooperating with the government investigation.

One Million Cases

Humans can be infected by bovine TB both by drinking raw milk from infected cattle or by inhaling infective droplets, according to the World Organization for Animal Health, or OIE. It’s estimated that in some countries as much as 10 percent of human tuberculosis is due to the bacteria, according to OIE.

China had about 96,000 new cases of human TB in September, and 151 related deaths, according to a report from the National Health and Family Planning Commission, which didn’t specify how many were caused by bovine TB.

The country reports about 1 million human TB infections a year, the most cases after India, according to the World Health Organization. China halved its TB prevalence rate through disease control to 108 cases per 100,000 people in 2010, from 215 cases in 1990, the Geneva-based global health agency said.

In the U.S., bovine TB causes less than 2 percent of the total number of cases of human TB per year, or fewer than 230 incidents annually, according to the Centers for Disease Control and Prevention.

Brucellosis is also an infectious disease caused by bacteria that can spread to people in contact with infected animals or contaminated products, according to the U.S. CDC.

Modern Dairy said in August that net income more than tripled to 523.2 million yuan ($85 million) in the fiscal first half as raw milk prices rose.

— With assistance by Daryl Loo, and Liza Lin

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