Prices have bounced
From the lows experienced early in October, temporary water prices have rebounded to around $60 in the Murrumbidgee. In the Murray above the choke it’s about $60 and below around $80. These are best estimates – price discovery in the market remains a dismal business.
On the supply side, allocations will reach 100 per cent for both Murray and Murrumbidgee GS, and most accounts will reach full capacity (carryover plus allocation) in the next month. The Murray price may have come down over the weekend after Murray Irrigation’s announced intention to sell efficiency dividends, rather than distribute them back to customers.
Demand indicators are also starting to firm. As the recent spell of fine weather holds out for a little longer, prices in temporary water markets have increased across the southern Basin. More cotton will go in than might have been assumed three weeks ago, and while there will be production risk from a cold and late planting, water demand is now a little clearer. Likewise, rice plantings shouldn’t have been too limited by the wet conditions.
The previous absence of buyer interest in the market - caused by uncertainty over summer crop planting - will shift. Growers without held entitlement to cover crop needs will be looking towards the temporary market to meet in season demand as the weather starts to warm up. Present low prices may reflect a lingering lack of urgency from buyers, but this won’t last as summer hits and water needs become more pressing.
Parking space – how will this market develop?
With a lot of cheap temporary water about, many irrigators will begin to think about how they can secure water for next season while avoiding carryover spill risk. Parking water on a licence with carryover space is an option increasingly being used, though it comes with a degree of counterparty risk. It’s an underutilised arrangement with limited information about market value to those with available space, or those wanting access.
It will be interesting to see how these market options develop, particularly as it’s use offers the prospect of more forward water leasing options on the market.