PHARMACEUTICAL giant GlaxoSmithKline (GSK) has slashed payments to its Tasmanian poppy growers by 12.5 per cent for next season's crop.
Morphine producers in the State will have prices cut by 12.5pc and thebaine growers face a similar drop of 12pc.
GSK crop supply head Rohan Kile said the move was "to remain competitive in a global sense".
"It's more to do with stock management at this stage," Mr Kile said.
Demand for thebaine - an alkaloid used in prescription drugs like Oxycodone - has dried up in the US, where the Drug Enforcement Agency has moved to stamp out prescription drug abuse.
Mr Kile said GSK planned to contract 9500 hectares of poppies in Tasmania next season, which would include a reduced amount of thebaine.
"We will be growing thebaine to fill our oripavine needs," Mr Kile said.
"The excess thebaine is going to add to problems in terms of stock on hand."
Mr Kile said he was hopeful the thebaine market would correct itself and that GSK was exploring other options for exporting to Europe and parts of Asia in particular.
Poppy Growers Tasmania president Glynn Williams said an oversupply of thebaine was problematic for growers and processors.
"The argument is that demand is going up and up, but the US situation brings into question Australia producing more material," he said.
Mr Williams suggested the US sales prediction had a direct impact on Tasmanian Alkaloids' decision to reduce its planting area by 20pc for the forthcoming crop.
Meanwhile, Tasmania's other processor, TPI Enterprises, has cut prices by 5-15pc, according to managing director Jarrod Ritchie.
Mr Ritchie said TPI, which mainly deals with morphine production, had reduced prices in response to a climbing Australian dollar.
"The whole industry sells at US dollars - foreign exchange can mean nearly a 10pc reduction in revenue," he said.
Price cuts would vary between growing area and contract, he said.
Over the past 10 years, the international thebaine market has been prone to short-term blips that occur sporadically, according to Mr Ritchie.
