Minister for Primary Industries David Carter says putting a legislative moratorium on new meat processing plants would be like putting a stop to progress.
The Alliance Group plans to close the sheep processing facility at its Mataura plant in Southland and move the work to Lorneville, near Invercargill, affecting 325 jobs.
The Meatworkers Union says there is an overcapacity of processing plants and wants a moratorium on new facilities.
Mr Carter acknowledges a reduction in livestock but says it isn't practical to stop new plants when older plants will inevitably close at some stage. He says modern plants will also provide employment.
Meat Industry Association chief executive Tim Ritchie says the Alliance move is the result of reduced livestock numbers, not overcapacity, and the company must adjust its capacity to work efficiently.
He says a "blunt instrument" like a moratorium is not necessarily the answer. "You can't say, well, we'll treat every region exactly the same. There may be a more pronounced movement of livestock numbers in certain parts of the country than other parts of the country."
Federated Farmers spokesperson Jeanette Maxwell says instead of stopping modern plants, the union would better to help farmers increase production.
She says some farmers are having to reduce the number of livestock they have under regional councils' long-term plans, and the union should put its energy into working with farmers to lobby against those restrictions.