Simplot Australia announced a 15 percent cut to contract with Tasmanian potato growers after losing half its exclusive french fry contract with McDonald's.
The move will cost growers A$10 million (About US$7.6 million). McDonald's wants more competitive pricing and greater market security. It is expected to assign the contract to McCains, which sources potatoes from both Australia and New Zealand.
Simplot managing director Terry O'Brien told ABC Radio there was no guarantee against further cuts.
"I feel like we've been the messengers of doom in Australia for a long time," he said. "We're the ones who continually have to tell growers that markets are not giving price increases or not wanting traditional volumes of products and usually we get beaten up pretty badly about it. But we are only the messenger and I think this one demonstrates it quite clearly."