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Several Farmers Look to Cancel Contracts with Diamond Foods (DMND), Might Be Tip of Iceberg

February 13, 2012 9:44 AM EST
Shares of Diamond Foods (Nasdaq: DMND) are moving higher Monday despite reports several walnut suppliers might stop supplying the company's wares.

On the heels of a hot accounting scandal involving the CEO and CFO of Diamond Foods, Reuters said about six small walnut growers will stop doing business with Diamond once their contracts expire. The growers cited Diamond's underpaying of farmers. Of the total, three said they hope to break their contract early.

But that might just be the tip of the iceberg. Reuters said the farmers knew of at least a dozen or more other farmers looking for early termination of their contracts as well. Currently, Diamond has about 1,000 suppliers, but just a few looking to exit might start a larger exodus.

One even said many farmers were furious because Diamond was paying about 25 percent below what other buyers were in 2011.

Last week, Diamond issued a release announcing an audit committee found financials for 2010 and 2011 would need to be restated due to lack of accounting for payments made to walnut growers.

Shares are about 1 percent better in early trading.


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