Millions of dollars has been donated to charities offering to help drought-stricken farmers by 'Buying a Bale' but there is a growing concern the practice is leading to a distortion in the fodder market.

There are now concerns from farmers and regulators that charities are outbidding farmers and pushing up the price of hay.

Derek Schoen, a farmer and agribusiness leader, was appointed by the NSW Government as the Drought Transport Integrity Adviser.

His role is to independently monitor the impact of subsidies and other pressures on the stockfeed market.

Charities paying 'ridiculous' prices for hay

Mr Schoen said charities that relied on buying hay had inadvertently left some farmers without feed and led to a price spike.

"Unfortunately, yes, we have had some reports that people have had hay booked up and ready for delivery [when] they've been told that unfortunately it was no longer available and that a charity had offered an elevated price for that hay," he said.

"So I know there are a few producers who have been gazumped by charities.

"You can understand charities get a fair bit of money and they have to be seen to be doing something with it.

"I don't think the charities realise just how short the supply of hay has been.

"Perhaps some of these charities do not realise the true cost of the hay and, in some cases, charities are paying ridiculous money to obtain hay to make a charity run."

Dairy farmer Gavin Moore believes large charities outbid him for hay he had contracted to arrive on his farm. ( ABC Rural: Sarina Locke )

Gavin Moore, a dairy farmer from Camden in NSW, said he had written and verbal contracts for fodder that was on a truck on the way to his farm only to have it redirected.

He believed drought charities were outbidding local farmers.

"Yes, I've heard that some of the big charity organisations are coming in over the top because they have a lot of funds behind them and just buying hay out from from underneath people," he said.

"One of my suspicions is that's what happened to us with a couple of the loads [and] in my opinion, it's leading to an over-inflated price in the marketplace.

"With new season hay set to come online in the next few weeks, I'm already seeing prices of $600 to $1,000 a tonne for hay and that's just ludicrous."

Rural Aid defends Buy A Bale program

Rural Aid runs the Buy a Bale program, which has received millions of dollars donated by individuals as well as large donations from banks and supermarkets looking to help farmers.

CEO Charles Alder said they were sourcing most of their hay from Western Australia and Queensland from farmers with whom they had worked for many years.

Mr Alder rejected the suggestion charities were outbidding farmers for hay and said they did not "pay through the nose".

Rural Aid denies paying excessive prices for hay and is conscious of spending donated funds wisely. ( ABC News: Jonathan Hair )

"We will pay a little bit over the market price but that's because supply is so tight, [but] we are certainly not paying much more than we would usually pay," he said.

"I can assure you, we really haven't been buying hay that's been put on the market.

"Hay producers have given it to us first up and we've said 'yep, we'll take the lot' for no more than we would usually pay, with a bit of fluctuation for supply tightening."

Mr Alder said they had knocked back a hay producer this week who had wanted more than the charity was willing to pay.

"We're very conscious that we're using money from millions of Australians and they want us to get bang for our buck," he said.

Farmers split on impact of government subsidies

On Wednesday, Prime Minister Scott Morrison was forced to defend a tweet which he said provided "another perspective on the drought".

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In the video tweet Michael MacCue from Wiliga Feedlot in north-west NSW says: "In some ways, drought is a necessary evil that will help cut out that bottom 10 per cent of farmers that shouldn't be there".

Mr MacCue told ABC Radio that freight and fodder subsidies from the NSW Government were distorting the market and hurting good producers.

"Assistance is great in most circumstances but in our circumstances, it can actually disadvantage us," he said.

"As soon as the freight subsidy came in, commodity prices went up."

Mr Schoen has been monitoring the fodder and freight prices and admitted some costs had increased.

"Freight costs have gone up a little bit, but it has not spiked like it did in previous droughts," he said.

"So the transport industry looks like they are playing fair in relation to the transport of fodder."