WATER policies in Victoria's north have led to a lack of faith in the future of the irrigated dairy industry says PETER WALSH

The closure of Murray-Goulburn's cheese-making factory in Leitchville is a sure sign that northern Victorian irrigators have lost confidence in the Brumby Government.

There's no doubt drought and commodity price fluctuations have had an impact on agriculture in northern Victoria but farmers have weathered drought and price changes in the past.

The reality is that the Brumby Government's water policies have left producers questioning the future of the irrigated food sector.

The Brumby Government's decision to allow the unbundling of water rights, lift water trading protections and allow the Commonwealth to enter the water market has producers doubting its commitment to irrigated food production.

There is also anger and confusion about the way the Government has gone about its supposed irrigation upgrade in the Goulburn Murray Water area.

For many, the illusion of a modernised irrigation system has turned into a nightmare.

The Government has set out to achieve its promised savings by closing down at least 60 per cent of the system. More than half of high security water right in northern Victoria will be traded away from food production by 2015.

The price of irrigation water could double within five years for those left in the industry.

These polices have made the devastating economic decline of communities such as Leitchville inevitable.

The Premier doesn't seem to realise that he can have food or he can have water. He cannot have both.