WATER entitlement prices have fallen to $1500 a megalitre.

This is in response to the Federal Government's withdrawal from the southern Murray Darling Basin market.

Last month Federal Water Minister Tony Burke pulled the plug on running any more southern basin water tenders until at least 2013, prompting prices to drop from $1800 to $1500.

"It's back to something that's in the order of its economic worth," Tatura Water broker Peter Leahy said.

Victorian Farmers' Federation water council chairman Richard Anderson said water was now more affordable, which meant irrigators could expand their operations and create more local employment.

"It has some real positive outcomes," Mr Anderson said.

In 2006-07 Goulburn and below-choke Murray high reliability water shares were selling for about $1500. But prices jumped to $2000 a megalitre when the Federal Government entered the water market in 2008 with $3.1 billion in its back pocket to buy Murray Darling Basin entitlement for the environment.

In 2009 prices spiked at about $2200 a megalitre during the Federal Government's drawn-out 2008-09 tender.

By 2009-10 the Federal Government had learned from its mistakes and began monitoring the market and running short tenders to snare the cheapest water possible, which resulted in prices dropping back to $1800-$2000 a megalitre.

The dominance of the Government was so great it accounted for 80 per cent of all permanent trades in northern Victoria until its backdown.

Since 2008 the Federal Government has purchased:

174,000 megalitres of Goulburn-Broken system high reliability water entitlements.

199,000 megalitres of Victorian Murray high reliability entitlements.

218,000 megalitres of NSW Murray general security entitlement.

147,000 megalitres of Murrumbidgee general security entitlement.

The Federal Government's three-year 174,000 megalitre buy-up compares with just 31,500 megalitres of Goulburn-Broken entitlement traded among irrigators in the 14 years to 2005-06.