Fears towns will be 'decimated' as rice miller cuts production

SunRice is cutting shifts at its Deniliquin and Leeton mills. (ABC Rural: Cara Jeffery)

SunRice is cutting shifts at mills in Leeton and Deniliquin, but the number of jobs to be cut is not yet clear.

The company has cited reduced rice supply due to drought and current water policy settings.

SunRice says it is consulting with employees and exploring redeployment opportunities.

Communities in southern NSW fear cutbacks to rice processing could put hundreds of people out of work and decimate regional economies.

SunRice has announced it will scale back its Riverina milling operations in response to a sustained reduction in local rice supply due to drought and water buybacks.

SunRice typically employs up to 650 people across the region.

In a statement, CEO Paul Serra said the company had started consultation with employees.

"As always, we are committed to engaging openly, constructively and transparently with our people throughout the consultation process.

"We continue to advocate to government on the adverse impacts of water policy settings."

In a statement, the Albanese government acknowledged the SunRice announcement was "concerning for [SunRice] workers, their families and impacted communities".

"We urge SunRice to explore all options possible to reduce those impacts in close partnership with its workforce," the statement said.

"The government is taking a balanced approach to water recovery that includes infrastructure investment, voluntary water purchases and community adjustment assistance.

"You can't have sustainable communities without a sustainable environment. A healthy Basin is crucial for all communities along the river system."

SunRice will reduce shifts at the Leeton Mill but is continuing its value-adding operations. (ABC Rural: Cara Jeffery)

The company will move from 24-7 production at Leeton to 16-hour shifts, five days a week.

Processing at its Deniliquin mill will still be done over five days each week, but hours will be cut from 24 to eight a day.

In a statement, United Workers Union director of food and beverage, Mel Gatfield, said the decision would have significant consequences for workers and their families.

"Many employees have dedicated years of service to the company and are now facing significant uncertainty about their future, including the prospect of having to relocate to secure suitable employment," she said.

Mel Gatfield says workers face significant uncertainty. (Supplied: United Workers Union)

Leeton Shire Council general manager Jackie Kruger said the cuts were a direct result of government purchasing w