SunRice says it has been forced to axe at least 100 jobs from its Deniliquin and Leeton mills in southern New South Wales due to low water availability and high water prices.

Key points:

Majority of jobs losses from Deniliquin mill

Majority of jobs losses from Deniliquin mill Chairman confident forecast $35m profit will prevail

Chairman confident forecast $35m profit will prevail SunRice supplies rice to more than 50 countries

The company will reconfigure its milling, packaging and warehouse operations in the Riverina over the next eight months in preparation for a significantly reduced rice crop next year.

SunRice chairman Laurie Arthur said the 2019 rice crop was shaping up to be the second smallest recorded since the millenium drought in 2003, when 400,000 tonnes of rice was delivered.

"It's a very tough for SunRice, our employee welfare is paramount and we will continue to employ 500 people in the Riverina," Mr Arthur said.

The majority of job losses would be from the Deniliquin mill as the general security water allocation in the Murray region was currently zero per cent.

The Murrumbidgee region, where the Leeton SunRice mill is located, had a 7 per cent general security water allocation.

The proposed reconfiguration, which is subject to consultation with employees and unions, will see operational changes and shift restructuring commence from January and be completed by August.

There was 600,000 tonnes of rice delivered from the Riverina in 2018 and that will continue to be processed during that period.

"The key focus will be rebuilding with a better season and better water availability, hopefully next season," Mr Arthur said.

Not the end for rice in the Riverina

Mr Arthur said the world still had a preference for premium Australian grown rice.

"I've just returned from Palestine and our rice sits at a 30 per cent premium to any rice there, we have fantastic markets around the world," he said.

SunRice CEO Rob Gordon and chairman Laurie Arthur. ( Photo: SunRice )

However, Mr Arthur said under the current climate and competition from cotton and horticulture industries, it was impossible for Riverina rice growers to compete for water.

"Other industries are starting to focus on the general security pool, we are hoping this can be addressed so we have a better situation in the future than the one we have at the moment," he said.

Impact for shareholders

Mr Arthur is confident SunRice would maintain its profit forecast of $35 million.

"It's quite a significant financial result and that is based on the changes we made to our global supply chain with mills now in Vietnam and California," he said.

"We have facilities all around the world and that's the way we had to go to due to fluctuating size of our Riverina rice crops.

"We would love for to be selling Riverina rice all over the world, that's what our customers want."

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SunRice now supplies rice and other products to more than 50 countries.

"We have been able to establish alternatives to our Australian product, in many cases it's not as good but it's okay, and that's why we rely very much on Australian rice coming back into production," Mr Arthur said.

"In the mean time we have to keep our markets open, we can't just walk away for a year and close a market or we would lose that market."

Forced to reduce crop size

Mr Arthur knows first hand the impact high water prices and lack of allocation is having.

This year he has planted just 100 hectares of rice on his Moulamein property, well back from 600ha he would normally grow.

"I'm still very fortunate I have been able to grow a crop this year, but with zero allocation and temporary water at $440 megalitre, it's very difficult," he said.

A rice crop being harvested near Deniliquin in southern NSW earlier this year. ( ABC Rural: Cara Jeffery )

Pushed out of water market

Ricegrowers Association of Australia president Jeremy Morton, also a grower from Moulamein, said the Murray-Darling Basin Plan, water reform and drought were to blame for the job losses at SunRice.

"In the past when there was a drought there would be a pool of available water and growers could go to that pool and buy water to grow a crop but that pool is now smaller," Mr Morton said.

"So with supply and demand, and a smaller pool and higher prices it's no longer commercially viable to enter the water market and grow a rice crop."

The RGA is concerned about further impacts if an additional 450 gigalitres of water is recovered under the Murray-Darling Basin Plan.

"If they go and recover a whole lot more water out of the productive pool you will see the end of some industries," Mr Morton said.

"It will come down to the value adding industries like rice and dairy and if the Government proceeds down this pathway, which one of those industries don't they want anymore?"

Water recovery dries up communities

Edward River Council mayor Norm Brennan is frustrated that the concerns of his community are not being heard.

"The two heads of the Murray Darling Basin Authority, Phillip Glyde and Neil Andrew should be held accountable, they are operating the plan and are not listening to the communities," Mr Brennan said.

"Was that the intent of the plan to decimate communities? No, it was to try and get balance back into the system.

"What it has done is put a lot of pressure on the communities both socially and economically," he said.

Mr Brennan planned to approach the developer constructing two solar farms near Deniliquin to relocate displaced SunRice employees.

The farms require 200 employees.

"It's a short-term fix over two years but hopefully by then mother nature might give some rain relief or operations might be fixed up within the Murray-Darling Basin Plan," Mr Brennan said.