Agricultural minister Peter Walsh announced the funding at the Sungold Field Days at Allansford last week.

He said the money would go into feed research and would hopefully diminish the need for farmers to buy in hay in the off season.

"At certain times of the year the standard supply of forage is in short supply, which means farmers have to buy in extra feed supplements," he said.

"The extra cost of buying supplements and the volatility of feed prices in the off-season is concerning for all dairy farmers in Victoria."

Mr Walsh said previous research had shown the grazing season could be extended by up to eight weeks, by adding chicory and plantain to perennial ryegrass.

The $1.2m will go towards finding out exactly how chicory and plantain can be integrated into pasture systems to boost farmers' profits.

Department of Primary Industries' (DPI) principal scientist Joe Jacobs said the next stage of the research would look at how alternative forages could boost dairy farm productivity when integrated into dairying systems.

While the research had already proven how much extra feed could be grown at key times of the year to extend the growing season, Mr Jacobs said they would now look at the milk response and the economic benefits of these species when integrated into commercial dairy farms.

Discussing the current Dairy Levy Poll 2012 meetings, Mr Walsh said research like this played a key role in driving the industry.

"Farmers might not be able to see it right now, but research like this adds up to something big," he said.

"We are taking small steps down a long journey."

Mr Walsh said Victoria's dairy farmers were now in a position to capitalise on the upcoming global 'food boom' and this research would help drive that.

"Our scientists are leading the world by providing practical and innovative solutions to increase dairy farmers; productivity and competitiveness in key export markets," he said.

Speaking after the Sungold Field Days last week, Warrnambool Cheese and Butter's chief financial officer Bill Hannah agreed there would be a 'food boom' in the future that would place dairy farmers in a better financial position.

"Farmers might be crying out for labour now, but as demand for food increases, I would like to think that will be reflected in the commodity price and attract new blood to agriculture," he said.

"Look at what happened with the mining boom."