Greg Anderson farmed in Yarroweyah near Cobram for eight years but pressure from drought led him to move his 300 cows to Cashmore, near Portland, last December.

"As time was going by, the pressure for water in the north was really concerning us," Mr Anderson said.

"With no long-range weather forecast predicting good rains, I said 'we have to go somewhere it rains'."

Mr Anderson is among a "steady" movement of farmers coming to the south-west, according to WestVic Dairy executive officer Lindsay Ferguson.

"We don't know the numbers, but there are an increasing number of farmers moving here from the north, maybe from the southern Riverina, elsewhere in NSW, and particularly the Murray irrigation area," Mr Ferguson said.

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Mr Anderson said irrigation costs for northern Victorian farmers had risen from $100 to $800 a megalitre, while for him to break even that price needed to between $180 and $200.

"The main reason there is a shortage of water is because of drought...[but] water is a pretty valuable commodity and it has gotten into the hands of people now who are just trading it," he said.

He said he knew of other farmers who had moved to the Cobden and Terang districts, but said while more Australian farmers might want to move to the south-west, many were "tied to their farms".

"Land prices where it rains are a lot more expensive and the first thing you have to do is find someone to take on where you are in that irrigation country," he said.

He said the family moved entirely for their daughters, Katie, 21, and Renee, 19.

"Our two daughters are just so passionate about dairying that we thought we just have to do this for them," he said.

Union Dairy Company is one processor working with farmers in drier climates considering a move to south-west Victoria, and chief operating officer Andrew Wellington said enquiry was building.

"Australia still needs dairy and there will be a natural shift to where the resources allow sustainable dairying, there is plenty of productive land here," Mr Wellington said.

He said the region's dairying potential gave the company confidence to moot plans for a second milk plant in the Warrnambool district or in South Australia.

The company started production in 2017 at a factory over the border in Penola, SA.

About 30 staff now operate the 24/7 plant producing fresh and frozen cream, premium powdered ingredients and fresh milk.