Bayer CropScience will set up the breeding centre, the first of its kind in Australia.

It will be the only one in the southern hemisphere, with the company planning seven world-wide.

Bayer chose the Longerenong site primarily because of water security provided by the pipeline.

The centre will generate about 20 full-time jobs and offer development opportunities for college students.

The State Government will contribute $1.24 million to the project and Horsham Rural City Council will provide $100,000.

WorkCo chief executive John Ackland said the development would be extremely significant to the region.

WorkCo Limited manages Longerenong College.

"The facility will create 24 full-time jobs and up to 40 part-time jobs during cropping and harvest," he said.

"Being on the college site it will offer access for our students and some of the Bayer staff will do some teaching for us.

"There will also be employment opportunities for students once they finish study."

Mr Ackland said the groups had been working on the partnership for two years.

"It is the type of partnership we strive to offer our students," he said.

"They can access the knowledge Bayer has and we can build Longerenong up further to attract even more students.

"It will also benefit our farming community because the centre will be breeding wheat and oil seeds to our climate conditions."

Bayer CropScience's bioscience operations general manager Rob Hall said the centre was part of the company's global strategy to address some of the challenges in agriculture.

"Each year wheat production grows by one per cent but demand increases by two per cent or above," he said.

"The investment we are making will try to close that productivity gap.

"We hope to have new seeds and traits that are more productive than what we have now."

Mr Hall said Longerenong had a number of advantages over other sites considered including good soils and agronomic conditions.

He said the water security offered by the pipeline was the major reason for choosing Longerenong.

Mr Hall said Bayer was still planning the facility but had already employed two people for the wheat program, with construction to begin in a few months.

Victoria's Deputy Premier Peter Ryan said the facility was another stage of development in the region's capacity to produce grain.

He said the government's contribution to the project would be used to improve access roads to the college.