The last-ever cotton harvest in far west New South Wales is under way at Tandou near Menindee, signalling the end of large-scale irrigated agriculture in the region.

The 79,000-hectare property will be converted to a dorper lamb business over the next several years.

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The Federal Government bought back Tandou's 22,000 megalitre water allocation last year, handing over $78 million to owner Webster Limited.

Property manager Robert Lowe said the decision to sell the water rights came after a run of tough years caused by a water shortage.

"It's a bit disappointing for me. I've been here for a long time and enjoyed the farming side of it," Mr Lowe said.

Tandou Menindee property manager Robert Lowe. ( ABC News: Declan Gooch )

"I think it's an impressive property and it's provided a lot of employment in the area so in some respects that's disappointing, but that's just the way it is."

The harvest started about two weeks ago with one picker processing 25-35ha a day, and now five machines are in operation.

Mr Lowe said the entire harvest would take another month or more.

Plan to reconfigure far west lakes

The Government buyback of Tandou's water was to allow a plan by water authorities to reconfigure the lakes system to make them more efficient.

The plan is one of 36 being considered by the Murray-Darling Basin Authority to offset reductions in water buybacks.

If adopted the plan would see a regulator constructed between Lake Menindee and Lake Cawndilla, where Tandou's water comes from.

That would mean water could be stopped from running from Lake Menindee into Lake Cawndilla.

Mr Lowe said current cropping conditions were a long way from the boom years of the 1990s.

The dry bed of Lake Menindee last month. ( ABC News: Declan Gooch )

"Menindee might hold 2 million megalitres — the whole scheme — and we would get a run of two or three years where we might use 50-80,000Ml and grow a full cropping program of wheat, barley and cotton," he said.

"That was historically how it worked and in a good time through the 90s Lake Cawndilla provided the water we needed.

"In that three-year period you'd often have the lakes being filled again or replenished with other flows."

Under the terms of the agreement with the Government, Tandou must remove all water supply infrastructure including pumps and offtakes.

"As far as on-farm structures [go], Websters still own this property and it'll be absorbed by the surrounding pastoral sheep enterprise," Mr Lowe said.

Effects on other parts of Menindee life

The Menindee region used to be known for its citrus and grape industry, but like cotton, the ongoing water shortages largely killed it off.

Boat tours are still operating and visitors are being encouraged to come and see other attractions around the region.

Local tour boat operator, Rob Gregory, said adjusting to the decline in primary production has been a challenge for the Menindee community.

"It's been a bad time. It's quite sad really … such a downturn in the town," Mr Gregory said.

Menindee Regional Tourist Association secretary, Margot Muscat, said the decline of irrigated agriculture damaged local morale.

Menindee Regional Tourist Association secretary Margot Muscat. ( ABC News: Declan Gooch )

"That's really affected our community. It's sad because when Tandou was really big they used to support our community by offering grants throughout the year.

"They had a lot of our community down there working as well — seasonal or full-timers. So it's a big downer on our community," Ms Muscat said.

The tourism association has begun a renewed push to promote the region, saying it needed to find a drawcard other than water to encourage visitors.