The Meat Industry Association says a moratorium on new meat processing plants called for by the Meatworkers Union would not avert future closures.
The Meatworkers Union is calling for the Government to impose a moratorium on new plants, saying the current overcapacity amounts to madness.
The Alliance Group plans to close the sheep processing facility at its Mataura plant in Southland, affecting more than 300 jobs.
Alliance says it will move sheep processing to its Lorneville plant, near Invercargill, due to declining sheep and lamb numbers. It says 260 processing workers and 65 other staff at Mataura will be affected.
Meat Industry Association chief executive Tim Ritchie says companies have to continually adjust and improve efficiency in order to survive in a competitive industry.
"It has potentially unfortunate consequences for some people and one feels for those people but Alliance have to remain competitive."
Gary Davis, of the Otago Southland Meatworkers Union, says staff were stunned and saddened by the news.
"They feel pretty cheated really, they've bent over backwards to make the plant work for the last few years. They took wage cuts last year and it's been to no avail for them."
Mr Davis says two new plants in recent years should never have been built. He says the government needs to step in.
"I think there should be a moratorium on any new plants being built ... try and get the industry back into the right mix so there's enough work to go round for our workers and farmers aren't seeing money wasted on buildings that aren't being used to one hundred percent."
But Mr Ritchie says there may be more pronounced movement of livestock in one region than in another and a blunt instrument like a moratorium, which treats all regions the same, is not the answer.
Call to train staff for dairy industry
Mr Davis also wants the government to provide training programmes to help meatworkers move into the growing dairy industry.
The union's national secretary, Graham Cooke, says the recent increase in plant capacity across the industry is madness, given falling lamb numbers.
"It's a dog's breakfast to be quite honest, because there are companies increasing capacity right as we speak. The number of new chains that have been built in the last five years - there's no industry plan."
Mr Cooke says staff can get work at Lorneville or the company's beef processing plant in Mataura.
However, he says the workers would lose seniority at the new posts and the uneven nature of the beef processing work could see them worse off financially.
"I'm told that a lot of them are fairly devastated at the news and they just want to know what the union can do in terms of coming up with a better rationale for them.
"If we can't resolve anything with the company, then obviously the best rationale is that we look at some severance package or redundancy package for these workers."
Mr Cooke says there will be a month of consultation before a final decision is made at Mataura.