Due to the botulism scare that rocked the New Zealand dairy industry, the Fonterra Shareholders' Fund units fell to its lowest level in 2013. Other dairy companies in New Zealand also saw a drop in units amid investor concerns that earnings will take a tumble due to the recent whey protein bacterial contamination. The New Zealand dollar also took a tumble as currency investors reacted to the ongoing uncertainty.

Units of the fund provide investors with access to dividends based on Fonterra's shares. The units dropped to 8.6 per cent at $NZ6.51. This means that more than $NZ60 million were lost from the fund's market value. Fonterra's units of fund were sold in November 2012 at $NZ5.50 per piece.

The shares of A2 Corporation, which sells milk containing a protein variant said to have health benefits dropped 4.5 per cent to 64 cents. Rakaia-based dairy company, Synlait Milk, also took a tumble of 4.1 per cent at $NZ2.60.

After last week's momentum, the New Zealand dollar dropped to as low as 76.99 U.S. cents from 78.31 cents. The Kiwi dollar recently traded at 77.15 cents, down from 78.87 cents from August 2's market close in Wellington.

Mike Jones, Bank of New Zealand strategist, said the Kiwi dollar had begun to weaken in August 2 as the news reached foreign exchange markets. Mr. Jones expected the New Zealand dollar to fall further by half to one U.S. cent as trading opens on August 5.

Mr. Jones also said that the drop in the Kiwi dollar might be a one-off because something has happened. Market implications will depend on how Fonterra will address the issue and defend its reputation as the world's largest milk manufacturer.

Fonterra, the world's biggest dairy exporter with China as its largest market, said that during the last weekend, the company had advised eight of its customers that the company discovered a strain of chlostridium which is a type of bacteria associated with botulism.

Fonterra informed the eight customers of the bacteria contamination in three batches of whey protein concentrate which were used as part of the ingredients in making infant formula. The whey protein concentrate was produced in one manufacturing site in New Zealand since May 2012. The July 31 test results showed the contamination and prompted the company to notify its customers.

Harbor Asset Management managing director Andrew Bascand said the uncertainty in the botulism scare would increase.

Fallout from the latest news that a dirty pipe at Fonterra's plant in Waikato might have caused the bacterial contamination of whey protein, may have negative implications on the dairy product prices in the upcoming GlobalDairyTrade auction later on this week.

According to Trade Minister Tim Groser, China has already issued an import ban on all milk products from New Zealand in response to the news of Fonterra's bacterial contamination.

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