The trend for water allocation prices across the southern Murray-Darling Basin. Source: Aither.
Water allocation prices have plummeted over the past year and may remain low, according to a new report.
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High volumes in dam storages, good rainfall and forecasts for above average rains have contributed towards the subdued prices, the report from consultants Aither found.
However, water entitlements were a different story, with prices increasing in the 2021-22 year.
Aither director Chris Olszak, speaking about the annual water market report, noted the laws of supply and demand had impacted allocation prices over the past two years.
He said this was good news for irrigation businesses as the ongoing wet conditions meant that 2022-23 would be another year when high water availability would support low allocation prices.
Aither associate director Erin Smith said 2020-21 was a pivot year in prices when conditions changed for the southern Murray-Darling Basin water markets.
Good supply conditions continued over the past 12 months, meaning the cost of water had not been a major worry for irrigators.
A major reason was the volume of water held in store in the southern reservoirs, which was the highest level for about 10 years.
On June 30, Murray storages (Lake Hume and Dartmouth) were 94 per cent full (2192 Gl more than July 1, 2021), Lake Eildon was 82 per cent full (802 Gl more than July 1, 2021) and Murrumbidgee storages (Blowering and Burrinjuck) were 93 per cent full (89 Gl less than July 1, 2021).
Allocation prices over 10 years. Source: Aither
However, entitlement prices recorded through the Aither Entitlement Index had increased by 18 per cent.
Ms Smith suggested the reasons included a limited supply on the market, which meant owners were holding onto their water, a number of agricultural commodities enjoying good returns, and an increase in permanent plantings in the southern basin.
“From a water policy and management perspective, 2021-22 was characterised by many of the same themes from the last water year, including water market transparency, improvements to the information and data available and strengthening metering, monitoring and compliance,” the Aither report said.
“The change in Federal Government towards the end of the water year renewed questions about the potential for changes in the approach to meeting Murray-Darling Basin Plan commitments.”
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