Walnut Growers Battle Diamond Foods

A handful of California farmers plan to stop selling walnuts to Diamond Foods, one of the biggest walnut processors in California, after reports that walnut growers have been underpayed. Diamond's chief executive and chief financial officer were ousted over the scandal.

Reuters reports that if there is an exodus, it might further curtail Diamond's orders and force the company to pay more. Guy Harris, whose family has sold walnuts to Diamond for 45 years, told Reuters, "Their prices are just not competitive. In 2010, they were 25 percent below a lot of other buyers."

The history of Diamond started as walnut growing cooperative in 1912 and went public in 2005, turning co-op members into both shareholders and suppliers with multi-year contracts to buy nuts at below-market rates. Growers accepted the rate since Diamond would take an entire season's crop.

The Diamond Foods accounting scandal opens doors for competitors as the walnut market is booming in both domestic and international markets.

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