Irrigators fear water prices headed to $1000 a megalitre
Water prices are heading to $1000 a megalitre, as trade restrictions coupled with low inflows cripple allocations — and speculators wade in.
IRRIGATORS fear the price of water will soon hit $1000 a megalitre, risking the viability of winegrape, citrus, almond and dried fruit production across the Murray Valley.
Water prices have already bubbled beyond the reach of dairy, rice and mixed farming enterprises, hitting $580/ML in the Goulburn, $690/ML in the Murray above the Barmah Choke and a staggering $800/ML below the Choke.
A perfect storm has hit the Murray Darling Basin food bowl, with the loss of almost 1.7 million megalitres of southern irrigators’ water to the environment, inter-valley trade restrictions, low inflows and speculators wading into markets.
At the same time the Murray Darling Basin Authority is pushing an extra 15,000 ML a day of environmental flows down the river, downstream of Yarrawonga Weir, pushing the river to capacity.
Merbein South winegrape and avocado grower Lindsay McClelland, who saw water prices hit $1000 during the millennium drought, said it was “crunch time” for anyone relying on the allocation market.
“People said they would never pay $1000 again after the last drought, but it’s already at $800 (a megalitre),” Mr McClelland said.
Barooga irrigator Chris Brooks said water was sure to get dearer, but the Federal Government could solve the shortages by releasing some of the 4.3 million megalitres held in storage.
Speaking at a rally of 3000 irrigators in Tocumwal last week, Mr Brooks called on Federal Environment Minister and local MP Sussan Ley to release environmental water to help irrigators finish off crops that could yield a million tonnes of fodder and grain.
“But she’d rather run it down the river to the sea,” Mr Brooks said.
Even almond and olive growers fear they will struggle to afford water, which was trading for $340/ML at this time last year and just $130/ML two years ago.
Executive chairman of olive grower Boundary Bend Limited, Rob McGavin, said “prices could do anything right now, because it’s not a rational market”.
“We’re greatly exposed to the allocation market and it’s quite scary. It’s (the market) a bubble the drought has exacerbated.”
The outlook is grim, with Victorian Murray irrigators gaining just 33 per cent of their entitlement to date. Murrumbidgee general security irrigators are on 6 per cent, while NSW Murray irrigators are yet to receive a drop of water.
The only state to record a decent allocation to date is South Australia, where irrigators have gained 74 per cent of their water right, 8 per cent of which was underwritten by Adelaide drawing 50,000ML from its $1.8 billion desalination plant rather than Murray River.
Live river data shows the Upper Murray’s August inflows have slumped to below those of last year’s dry spring, reinforcing Japanese and other global forecasts of an “extremely” dry start to the season.
NSW Barooga father-and-son irrigators Mark and Rob Ryan said they had already decided to bale their crops.
“One megalitre will grow an extra two tonnes of wheat,” Rob Ryan said. “It’s pretty simple economics (not to irrigate) when wheat is at $300 a tonne and water is $700 a meg.”
Steven Frasca, who runs 160ha of winegrapes with his two brothers at Wargan in the Sunraysia, said the current price of $800/ML was already putting immense pressure on the business.
“We’re not speculators, we buy water to use it,” Mr Frasca said. “Where do we go from here trying to set up a business for the future,” he said. “Our confidence as young growers is very low.”
Speculators continue to talk up the market, with Duxton Water chairman Edouard Peters telling investors at a recent forum at the Mildura Working Man’s Club prices could hit $1500/ML by March.
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Duxton Water has repeatedly told prospective investors the cut-off price, beyond which production is no longer profitable, is $1800/ML for wine grapes and $3000/ML for fruit and almonds.
But analysis by a vigneron director of the industry’s peak industry body, Australian Grape and Wine, shows that 98 per cent of Murray Valley winegrape production is unviable at $1000/ML.
Lindsay McClelland said the only way growers survived was by relying on holding a decent parcel of entitlement.
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Citrus Australia chief executive Nathan Hancock said the balance in the water market had shifted too far towards traders and brokers making a profit at the expense of growers.
“Without immediate changes to the current system, growers will face increasing pressure to their businesses, which will result in irrevocable effects for the wider community,” Mr Hancock said.
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