Drought-stricken farmers in the southern Murray-Darling Basin will no longer be able to access heavily subsidised water to grow crops for livestock.
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The federal and South Australian governments on Friday scrapped the Water for Fodder scheme, citing easing drought conditions across Victoria and southern NSW.
Federal Water Minister Keith Pitt said hay prices had fallen 40 per cent in the Goulburn and Murray valleys since the start of the year.
"While we're not out of the woods yet, but conditions are better than they were this time last year which allowed us to make this joint decision," he said in a statement.
The program promised to deliver 100 gigalitres of water for farmers to grow feed for animals.
But just 40 gigalitres flowed to producers, with a review warning South Australia didn't have the water security to proceed on the agreed timeline.
The review found the program may have been able to restart if more water became available.
Farmers gave the water subsidies a thumbs up, with 84 per cent of round one applicants saying they would apply in a future round.
Under the deal, the federal government was supposed to give $100 million to South Australia to ramp up operations at its desalination plant.
That would free up water upstream for the scheme.
SA Water Minister David Speirs last month said the cost of running the desal plant to provide water for the scheme was prohibitive.
A study found it would cost taxpayers $645 million a year to provide 30GL a year in perpetuity.
SA Greens senator Sarah Hanson-Young campaigned for the program to be scrapped.
"SA's water supply needs to be protected, and we cannot afford to lose 60GL more, so upstream farmers can get some water," she said last month.
"It puts the whole river system in jeopardy and will cost taxpayers an absolute fortune."
Australian Associated Press
