Fonterra has put its Australian business, a major supplier of milk, up for sale in a move that has farmers concerned about shrinking competition in the processing sector.

The New Zealand-based dairy giant – behind household brands such as Western Star butter, Mainland cheese and Perfect Italiano cheese – has eight manufacturing sites spread across Victoria and Tasmania. It employs about 1600 people and collects about 1.4 billion litres of milk annually from hundreds of Australian farmers.