Bakers prefer butter, helping prices soar
Consumers around the world are willing to pay more for products containing dairy and this is driving demand for butter and cream, says Fonterra.
Waikato University Professor of Economics, Frank Scrimgeour described it as an appalling move; he is disappointed with the country's largest company.
Speaking at the Future Farms Conference in Palmerston North today, Scrimgeour said in the past he resisted from making negative comments about Fonterra but was speaking out now.
Fonterra has told about 20% of its 19000 suppliers that payments for services they provide will now be made within 90 days, instead of within 30 days. It also wanted suppliers to drop prices.
Scrimgeour says Fonterra should treat its suppliers with respect and follow standard commercial processes.
"When I observe people in the Waikato who supplied services for Fonterra for more than 20 years and they get 'a Dear John' letter; it's not even personalised.
"They get told the bills are not gonna be paid for 90 days and that the demanding a drop in price of 10%; that's not the way you do business.
"If you want to renegotiate the contract you face up to them and talk to them face-to-face; this is very bad modelling, very unhelpful for the cause of dairying, very unhelpful for the reputation of Fonterra."
Scrimgeour says the dairy industry has to face many challenges that are not of their own making.
Life's already difficult but Fonterra must play the tough game and within the rules.
