Price of water hits new highs as dry conditions collide with growing demand
In releasing the annual Aither Water Markets Report, Director Chris Olszak said today that “2018-19 will be remembered as a year when widespread dry conditions collided with strong and growing water demand to significantly increase water prices in the southern Murray-Darling Basin (MDB)”.
“Allocation prices in the southern MDB are now being sustained at levels that were only observed briefly in the Millennium Drought. During the 2018-19 water year, average monthly allocation prices increased from approximately
$230 per megalitre (July 2018) to above $550 per megalitre (June 2019).”
“Prices increased steadily throughout the year, exceeding what would previously have been expected given the volume of consumptive water available. This suggests that significant structural change in demand is taking place.”
“Ongoing investment in new almond developments and other permanent horticulture in the Lower Murray is playing a significant role in driving demand. Rice growers were priced out of the market almost entirely and dairy farmers
endured a tough year with unfavourable milk prices and high water and fodder costs driving production down.”
Mr Olszak said “Entitlement prices increased for the sixth consecutive year. The Aither Entitlement Index (which tracks the relative performance of a group of major water entitlement types across the southern MDB) reached a new record high of 224 in June 2019, up 24 per cent from 181 in June 2018. The total market value of water rights in the southern MDB reached a record $22.7 billion, up from $15.9 billion 12 months ago.”
“Looking to 2019-20 and beyond, despite some recent rain, inflows remain low. We expect a big reduction in the cotton crop, unless high inflows return to the Murrumbidgee before October 2019. Horticulturalists will be thinking about this year and the following year, and will be moving to secure water for their permanent plantings. This will keep prices high”, said Chris Olszak.
“With inter-valley trade limits already in effect, prices in the Lower Murray are expected to be the highest of all trading zones and a large price differential could emerge with upstream trading zones, particularly the Goulburn. Price differentials of over $100 per ML are already being observed in early trading in 2019-20.”
Aither released their annual Aither Water Markets Report today, summarising water trading activity and trends in the southern MDB. The report enhances market transparency by reporting on the 2018-19 year and provides readers
with insights into Aither’s outlook into the 2019-20 year and beyond.
Aither’s full report is available online at:
/Public Release.
