Australian growers are fighting McCain Foods proposal to cut their prices by A$30 a tonne (About US$23 per 1.1 tons).
McCain asked its growers in the state of Victoria growers to supply any excess potatoes for A$30 less than the A$230.25 (About US$179) contract price.
McCain and its rival Simplot Australia are battling to compete with cheap processed potato imports from New Zealand.
Growers rejected the McCain move.
"Growers know once they accept a lower price, even on above-contract volumes, it will become the industry-wide price," a spokesman said.
McCain made the offer when processing potatoes were selling on the uncontrolled spot market at just A$100 (About US$78) a tonne. Fresh potatoes were selling for A$100 to A$140 (About US$109) a tonne.
Between 1,800 and 2,800 tonnes of New Zealand processed product is entering the country every month. The imports, going into supermarket house brand frozen chips, are seen as the biggest threat to the Australian industry.
"Supermarkets don't care what they put into those house brand bags," Tasmanian grower committee chairman Phillip Beswick said.
Tasmanian producers earlier rejected a McCain request to grow 1,000 tonnes of a new, high-yielding processing potato variety for A$30 a tonne less than the contract price. Again growers were concerned the price could become the new contract price.