ABARES flags falling water price

07 Mar, 2019 08:13 AM
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LAKE DARTMOUTH: Lake Dartmouth, the main drought storage, currently holds about a third of all water available in the Basin.
LAKE DARTMOUTH: Lake Dartmouth, the main drought storage, currently holds about a third of all water available in the Basin.

Relief on water allocation prices may be ahead, according to new research presented to the ABARES Outlook 2019 conference, Canberra.

ABARES head of farm performance and forestry David Galeano told the conference allocation prices in 2019-20 were unlikely to be as high as those in the Millennium drought, although they had been trading around $450 megalitre recently.

“Prices have been high in 2018-19, largely due to low allocation percentages and hot and dry seasonal conditions, within NSW,” Mr Galeano said.

The latest ABARES Water Market Outlook provided a range of possible allocation prices for the coming season, covering dry, average and wet scenarios.

“Under the dry scenario, water availability for the southern basin would fall overall, but still remain above levels observed during the worst of the millennium drought, back in 2007 to 2009, with ABARES’ model simulating an average annual water price of $473 a megalitre,” Mr Galeano said.

"Even under the dry scenario, we're still expecting the total amount of water available to be higher than the lows we saw during the peak of the millennium drought.

“There is a risk that prices in the Murrumbidgee could increase even more than that next year, with the Murrumbidgee import limit estimated to remain in force, unless conditions improve in NSW.

“However, if we do see a shift to wetter conditions this winter, prices are expected to fall quickly and substantially, similar to what occurred in 2016-17.”

There was still plenty of uncertainty about seasonal conditions in 2019-20.

“Conditions better or worse than the scenarios tested are possible – and hence water prices higher or lower than those estimated in our latest outlook – remain a possibility," he said.

“Aside from seasonal conditions, water demand in the lower Murray has continued to grow in recent years contributing somewhat to higher water prices.

“However, this growth is not unexpected and remains within the bounds of scenarios presented in a previous ABARES study,” Mr Galeano said.

But the conference has also been told the Murray-Darling Basin Authority is already planning to manage the heightened probability of low water availability next summer.

The MDBA River Management division’s told the conference northern parts of the basin had experienced the lowest rainfall on record in the past two years.

Areas in the south had also seen severe rainfall deficiencies, especially on the NSW side of the Murray River.

“Unsurprisingly, that lack of rainfall has translated into lower inflows and lower storage levels across the basin,” Mr Reynolds said.

“The advice from the Bureau of Meteorology means we can’t bank on increased or even average rainfall this coming winter.

“If anything, it’s likely to be drier, so any rain that does fall does so into dry catchments, which in turn reduces inflows to storages.”

He said the MDBA’s role in the southern connected Basin was to share the water between Victoria and New South Wales, who then supplied South Australia.

“Before water is available for the states we need to make sure there is enough to run the system and to support critical human water needs,” Mr Reynolds said.

“The job of the states to share water between their water users will be a lot easier next water year if we’re lucky enough to have significant rainfall this coming winter and spring.

“However, if it is dry it gets harder as we’re working from a lower storage base.”

River management was now focussed on conserving water as best as the MDBA could, with Lake Dartmouth, the main drought storage, currently holding about a third of all water available in the Basin.

“It’s just too early to forecast the impact of the current conditions on next year’s allocations,” Mr Reynolds said.

“However, if it does stay dry I would expect a greater reliance across the board on buying and selling temporary water on the water market, as well as a greater reliance on carry-over provisions, which allow entitlement holders with allocations to save some of their water this year to use next year.”

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