Dairy giant Fonterra's products at the center of a global contamination scare this month did not contain a bacteria that could cause botulism, and posed no food safety threat, New Zealand officials said on Wednesday.

The Ministry for Primary Industries (MPI) said tests showed that whey protein concentrate manufactured by the world's largest dairy processor contained clostridium sporogenes, which cannot cause botulism, but which at elevated levels can be associated with food spoilage.

Original tests conducted by Fonterra and a New Zealand government research institute had indicated the presence of clostridium botulinum, raising fears that infant formula and sports drinks made from the product and widely exported could be potentially dangerous.

The botulism scare triggered a recall of products made by multinational brands that may have contained the whey protein in a number of markets, from China to the Middle East and Southeast Asia. It also prompted bans in Russia and Sri Lanka, while other countries stepped up scrutiny of Fonterra's dairy products.

"We went to world-leading labs, which are accredited and can test for this. That has given us a clear and definitive sense that it isn't clostridium botulinum," MPI acting director-general Scott Gallacher told reporters. "There is no food safety risk here."

Fonterra CEO Theo Spierings said he was "very relieved" that the MPI's tests showed the company's products did not pose any food safety risk. He said Fonterra "did the right thing" in announcing the possible risk earlier this month.

"When you go through a global recall, you know it will affect your reputation," Spierings told reporters. "If we had not acted on this, and if something had happened with one child in the world, then it would have caused a massive reputation issue in the long term, or even you could be wiped off the map and possibly face closure."

Spierings said Fonterra's interim tests had isolated the possible presence of either clostridium sporogenes or clostridium botulinum, and that the final stage of the company's testing had shown a positive result for the botulinum strain.

He said he would not judge any mistakes which may have occurred in the testing process. Fonterra has said the contaminated whey protein concentrate was caused by a dirty pipe at one of its processing plants. The MPI said it began its own independent tests in early August after being informed by Fonterra of the possible contamination.

"EMBARRASSMENT"

New Zealand Trade Minister Tim Groser said the initial contamination scare based on Fonterra's initial test result was "an embarrassment" to New Zealand, whose reputation as a source of clean, safe food products was questioned by global consumers. Fonterra controls around a third of the world's dairy exports.

"We checked the information, the information turned out to be false, the consequences of this have been very serious, (we're) not comfortable about that, and we need some answers to how all this happened," he told Radio New Zealand, noting that a government inquiry was one of four currently underway into the affair.

The ministry's test results, giving the all clear from potential botulism-causing bacteria, could help repair Fonterra's reputation. "Obviously, it's caused some damage, but we shouldn't lose sight of the fact that Fonterra did raise the alert even if it wasn't absolutely certain," said BNZ economist Doug Steel.

Fonterra said it resumed operations in Sri Lanka after suspending activity at its offices and factories there late last week following protests against its milk products. Fonterra has 755 employees in Sri Lanka - where New Zealand supplies two-thirds of annual milk powder imports.

Trading in Fonterra's Shareholders Fund units was suspended earlier on Wednesday.

(Additional reporting by Gyles Beckford; Editing by Ian Geoghegan)