WELLINGTON (Reuters) - Suspected environmental activists have threatened to contaminate infant formula in New Zealand, the world's largest dairy exporter, in an attempt to halt the use of an agricultural poison on pests such as rats and possums.
New Zealand police said on Tuesday letters were sent to the national farmers' group and dairy giant Fonterra in November accompanied by packages of infant formula laced with 1080, demanding that use of the toxic pesticide be stopped by the end of March.
The announcement pushed the New Zealand dollar to a six-week low over concerns about the possible impact on the country, which depends on dairy products for about a quarter of its export earnings.
Trading in New Zealand's dairy companies and futures was halted for a while following the second milk-safety scare to hit the country over a two-year period.
Police said no traces of the poison resembling salt crystals were found in any products in factories. The Ministry of Primary Industries (MPI) also sought to assure consumers, saying the chances of contamination were extremely low.
"We are confident that New Zealand infant and other formula is just as safe today as it was before this threat was made. People should keep using it as they always have," said MPI Deputy Director-General Scott Gallacher.
Security of production facilities and the supply chain had been increased, the police said.
"Whilst there is a possibility that this threat is a hoax, we must treat the threat seriously and a priority investigation is underway," said Police Deputy Commissioner Mike Clement in a statement.
He said no further letters had been received after the initial batch and the matter was being treated as blackmail rather than terrorism.
Fonterra, which controls nearly 90 percent of the country's milk supply and collected roughly 14 billion liters of the liquid last year, said in-house tests conducted since January had not found any traces of the poison in its dairy products including infant formula powder.
"We can fully assure our customers and consumers that all of our milk and products are safe and of high quality, and our supply chain continues to be secure and world-class," Fonterra CEO Theo Spierings said in a statement.
"We have taken immediate and decisive steps to give our customers and consumers added confidence - including increased testing and security measures."
The poison 1080 is extremely toxic and is used extensively in New Zealand, including in national parks and around the Milford Sound, one of the country's biggest tourism draws, to control pests such as stoats, rabbits, deer, rats and possums.
While these non-native species cause damage to the native flora and fauna, conservation groups have long criticized the use of 1080 because of the unintended impact on native wildlife, and there have been occasional protests against its use and unsuccessful campaigns to have it banned.
The latest threat to the country's dairy industry, which exported $11 billion in milk products in 2014, follows a contamination scare in 2013, when a botulism-causing bacteria was believed to be found in one of Fonterra's products.
The incident prompted a recall of infant formula, sports drinks and other products in China, its biggest buyer, and other countries before the discovery was discovered to be false.
Dairy products make up more than 7 percent of New Zealand's gross domestic product.
The New Zealand dollar fell on Tuesday to as low as $0.7278, its weakest since early February, following the announcement, and analysts were bracing for any economic fallout from the incident.
"It's just a threat and at this stage it hasn't been carried out," ANZ agricultural economist Con Williams said.
"It's really the reputational issue given the sensitivity about food safety issues, and those things are impossible to quantify."
($1 = 1.3706 New Zealand dollars)
Editing by Muralikumar Anantharaman