THE Warrnambool Cheese and Butter Factory and National Foods will join forces to sell cheese early next year.

The new company, to be known as the Australian Cheese Company, will operate the cheese business of Australian Co-operative Foods Limited, trading as Dairy Farmers.

National Foods bought Dairy Farmers late last month.

Warrnambool Cheese will contribute $105 million for its share in the new venture, which will be owned half each by National Foods and WCB.

Warrnambool Cheese managing director and chief executive officer Neil Kearney said the joint venture provided WCB with ownership in some of Australia's premier cheese brands including Coon, Cracker Barrel and Mil Lel.

He said the joint venture would help Warrnambool Cheese cope with volatility in the world's markets.

"Warrnambool Cheese is primarily involved with bulk ingredients like cheese, milk powder and butter and more than 50 per cent is exported," Mr Kearney said.

"The joint venture is a new business that is much more stable and not as susceptible to price movements around the world."

He said the business diversification should give suppliers confidence that Warrnambool Cheese would be more stable in future.

National Foods managing director Ashley Waugh said the joint venture brought together the skills of both parties.

The new company is expected to be formed during the first quarter of next year.

Warrnambool Cheese and Butter's contribution of $105 million will be funded with a combination of debt and equity.

The new company will operate the cheese manufacturing, cutting and wrapping facilities of Dairy Farmers at Allansford, Simpson and Jervois, South Australia.

Cheese manufactured at the Malanda, Queensland, milk factory will be supplied to the new company.

WCB will supply bulk cheese from its Allansford plant to the new company and will supply milk to the Simpson factory.

National Foods will also supply milk to the new company.

Existing Dairy Farmers employees at the Simpson, Allansford and Jervois facilities will be employed by WCB while employees involved in cheese distribution, sales or marketing will be employees of National Foods.