China Mengniu Dairy Co's proposed $600 million acquisition of Lion Dairy & Drinks has opened up divisions between politicians and farmers over the future of the $13 billion dairy industry, which is facing its lowest annual production since 1995.

While politicians have expressed concern about the sale of yet more Australian dairy assets to foreign buyers, farmers say the deal could bring an end to cheap housebrand milk and shows the Chinese place more value on dairy than Canberra, which has been criticised for its inaction as thousands of farmers quit the industry.