RAIN in August has improved run-off into major catchment storage levels, but inflows have still been below the annual average into Southern Murray-Darling Basin storages following the dry May to July period.
Major storages of Dartmouth and Hume in NSW and Vic are at more than 80 per cent capacity, significantly well up on this time last year prior to major spring rains.
The improvement in inflows provides irrigators in NSW and Vic some confidence in increased volumes of allocation. NSW did not change its allocation percentage for its mid-month announcement, while Vic received an additional 4 per cent to 70pc allocation.
Both states’ allocation percentages are expected to be increased in September.
It is too early to forecast allocations for next season (2018-19) until the 2017 spring and early summer inflows are finalised. Recent improved inflows into the upstream storages are already being set aside to support the forthcoming 2018-19 River Murray Class 3a and 3b allocations.
With spring flush occurring on most horticultural crops, irrigators are planning their upcoming months of water use and trading plans to minimise their costs with minimal water risk.
At the moment, SA Murray allocation is the most freely tradable temporary allocation and only major class of water to reach 100pc allocation so far this season across the southern connected market. Essentially, it can be sold unrestricted into all upstream markets if not needed locally.
With upstream demand anticipated to increase and persist throughout the 2017-18 season, prices above $100 a megalitre may remain in the temporary allocation markets for months to come. This is pertinent if below average inflows persist.
With all this in mind, local irrigators need to think about the types of water product best suited to their water needs.
The water market continues to develop further, from the normal permanent and temporary water markets, to now include leasing of permanent entitlement, forward allocation agreements and parking/carryover agreements.
Water licences separated from land enable irrigators to hold licences in different regions to minimise their allocation supply risk, or enter into the other market tools to meet their water allocation supply requirements.
For example, permanent plantings irrigators in the Riverland with insufficient Class 3a or 3b holdings may consider diversifying some of their water needs. Leasing permanent entitlements in another region or entering into a forward allocation agreement will provide some certainty of costs with the fluctuating cost of water and still provide a portion of the required allocation water to use or alternatively trade.
For those with adequate permanent entitlement holdings and available water this season there are options to diversify water assets to optimise its capital value and subdue supply risk during dryer times.
Similarly those without permanent plantings (such as a private investor) may also consider such products as part of a diversified strategy aiming to smooth out the potentially variable investment returns water is capable of long-term.
The water market is evolving. Water can be a complex and costly part of business operations and through appropriate planning, risk assessment and product knowledge it can be managed to minimise risk and cost to the business.