SunRice chief executive Gary Helou said another year of drought and low rice production had made it impossible to sustain Australian operations at their current level.

"For yet another year, we are experiencing critically low rice crop sizes with just 75,000 tonnes expected for the 2009 harvest," Mr Helou said.

"This comes off the back of last year's harvest of only 19,000t, which was the lowest in the industry’s history since 1928.

"These levels are nowhere near the 1.2 million tonnes that we have the capacity to process each year, and while we were able to carry over rice stocks for milling in 2008, we have no reserves left in the Riverina to supplement our 2009 operations."

But Mr Helou said SunRice's international rice trading arrangements would ensure that the business would continue to operate.

"Unfortunately, it is impossible to continue operating at the current level at Leeton Mill and in other areas of the business that rely solely on Riverina rice volumes," he said.

"We regret the impact that this decision will have on many of our dedicated employees and their families and will do everything possible to ensure that their transition is managed in the best possible manner.

"All affected employees will receive their full entitlements and severance payments, and we have also arranged support services in the form of counselling, financial advice and job placement assistance."

SunRice will continue to employ 604 people across Australia in its grain storage, rice milling, rice foods processing and other businesses.

Mr Helou said SunRice and its subsidiary brands would not be impacted by the decision.

"The areas of the business that are not directly affected by the Australian rice shortage continue to perform strongly, underpinning our overall business profits and dividend payments and ensuring that we are in a strong position to rebuild our regional operations when the drought breaks," he said.