Barry McGuinness runs a 140-acre farm in Daylesford with a 25 megalitre water entitlement from two registered dams.

The dams have been built over two springs which flow into Leeches Creek, part of the Loddon catchment.

Mr McGuinness said he was devastated when told he was banned from using the water until a sufficient amount of rainfall was received.

"This is an important integral part of the property. Part of the plan is to grow organic food," he said.

"It's devastating because we cannot use this water to produce."

The dams, which are two-thirds full, are built up from Leeches Creek which is dry.

"We have good dams and we cannot use them. We have to sit here and watch it evaporate," Mr McGuinness said.

Gareth Devenish has managed the farm since August. He is helping Mr McGuidhnness with the development of a model permaculture farm using cutting-edge techniques and technology as a supplier of food to local markets.

Mr Devenish's intention was to use about two megalitres of water to irrigate the crop.

It was on his birthday when Goulburn Murray Water told him all irrigation from dams on Leeches Creek was banned.

"I'm outraged. At first I was depressed," he said.

"It's denied all environmental justices. What am I going to do now? Clean cottages?"

Mr Devenish said the suspension of the water entitlement had devalued the property.

"The existing right to earn our livelihood has been suspended without recourse to compensation. I have to watch a hothouse full of plants die," he said.

A spokesman from Goulburn-Murray Water said the dams were spring-fed.

He said any flow into Leeches Creek was for stock and domestic use only.

"We are trying to stretch it as far as it can go," he said.

"We feel for everyone. This drought is affecting everyone."

Goulburn-Murray Water has suspended or placed severe restrictions on 90 per cent of its streams.

"Farmers are stretched to their limit," the spokesman said.

"If we had water we would give it to them."