The rice industry is the 'backbone' of this small town, but it's struggling

In short:

A cut to rice processing in Deniliquin has put 68 people out of work, with flow-on effects for downstream industries and the community.

SunRice says the cut is due to lower rice production as a result of drought and water buybacks.

What's next:

The Albanese government says it's working with the NSW government, the United Workers Union and the community on how to support affected workers.

It's just over a month since Australia's largest rice processor, SunRice, laid off nearly 80 workers in southern NSW, and already some people are struggling to pay rent.

Deniliquin has a population of 7,500 and the loss of 68 jobs at the town's rice mill has hit the community hard.

Vinnies Services manager Meghan Fisher said affordable housing was already in short supply in Deniliquin, making it difficult for people who were out of work.

"Not only are they dealing with [not] being able to pay the rent while they're looking for another job or waiting for government allowance … they won't be able to find one that's going to be more affordable."

The ABC has heard of cases where one family member might have retained their job at the rice mill, while another has been made redundant.

"Even for people who might not have lost their job yet, their understanding is that redundancies will still sort of keep happening over time, that's really hard on a lot of families," Ms Fisher said.

Edward River Council Mayor Ashley Hall said one in five jobs in the region is directly linked to the rice industry.

"It's a backbone of this community, our retail sector, our health precinct, our education systems, rely on that rice industry,"he said.

He fears for the long-term future of rice processing without a change in government water policy.

Downstream businesses, such as Downes Rice Hulls, are also feeling the pinch.

A by-product of milling, the hulls are the hard outer shell around the rice grain and are used for bedding for intensive animal industries.

Jenny Downes said the shortage of rice meant they have to mix in straw to produce the bedding, costing her business hundreds of thousands of dollars.

"We've had to put some staff off already," she said. "That's why we bring in the top straw to try and keep our people employed, gives us something to put on the trucks and deliver to the client."

Fears more job losses to come

Deniliquin's SunRice mill is the largest in the southern hemisphere but is operating at a fraction of capacity.

Last year's harvest of 180 thousand tonnes was the smallest in six years.

The company shed 68 jobs at Deniliquin and another 10 at its milling operations in Leeton in August, while another 13 employees were re-deployed.

SunRice CEO Paul Serra said the low crop production was due to dry seasonal conditions and government policy of buying water entitlements for the environment in the Murray Darling Basin.

"One in every three litres of water that was available for irrigation over a decade ago is now no longer available and that pushes the [water] prices up, which makes it less economical for … crops such as rice," he said.

With a 22 per cent fall in rice production predicted this summer, the industry and local One Nation MP David Farley have been calling for Commonwealth environmental water to be unlocked for agriculture.

"We think the government can do that very quickly and the funds from that can be used to help fix the river, which enables a working river to also be an environmentally sustainable river," Mr Serra said.

He said he hoped there would be no more cuts to rice processing but wasn't prepared to rule it out.

"We're waiting to see what the season brings for us, we're really hopeful that the government can release water in a timely manner … for growers."

Adding value to safeguard future

SunRice has a $70 million plan to modernise its 50-year-old infrastructure and increase value-adding, like rice cakes, high-protein rice and snack products.

"The more profit we make from selling high-valued rice around the world, the more we can afford to pay for rice in Australia," Mr Serra said.

A statement from the federal government said an application from SunRice for co-investment in a rice cake facility is being considered, as is help for affected workers.

"We have been working for some time with the NSW government, industry, the United Workers Union and the community to come up with ways to support workers who were recently laid off by SunRice or whose jobs are uncertain into the future," the statement said.

Watch ABC TV's Landline at 12:30pm (AEST) on Sunday or stream any time on ABC iview.