Option 1: Over the long term, pursue a takeover or a strategic partnership with a large textile company in order to secure your supply chain. If you are of the size where you are increasingly dependent on a small group of suppliers, to the degree that your business cannot readily handle a supplier issue by purchasing elsewhere, this suggests that you may need far greater control over your supply chain. The advantage of this strategy is that it gives you a more secure position in the future; the disadvantage is that it is not a short term solution.
Option 2: Negotiate with the other two suppliers to gradually ramp up production so that you can phase out F(*&^t Yarns from your supply chain. The pros of this is that you will not be held hostage to F(*&^t (demanding a higher price for a contract already in place suggests a supplier who is a bit shady); the cons are that you now will have only two suppliers.
Overall, I think yielding to the demands for the price increase would be problematic as F(*&^t Yarns appears to be in breach of contract by asking for more money; besides, it would set a bad precedent.