Australia’s leading independent irrigation markets advisor, Aither, has predicted water costs could drop below $100/ML, this financial year.
Aither director, Chris Olszak, said last financial year, water markets across the southern Murray-Darling basin had been characterised by increased price volatility.
“Despite this volatility, dry conditions have meant that the trend over recent years has been up,” Mr Olszak said.
“The total value of commercial trade in 2015-16 in the southern Murray-Darling Basin was approximately $400 million for entitlements and $260 million for allocations. The combined market value for major consumptive water entitlements in the southern Murray-Darling Basin has doubled in the past three years and is now valued at over $11.5 billion”.
But he said good rainfall, run off into dams and the milk price collapse had softened price expectations for the coming year.
“We expect annual average southern Murray-Darling Basin allocation prices in 2016-17 to be around $170/ML under average conditions. If higher than median rainfall prevails, allocation prices could be lower than $135/ML – if rainfall is substantially higher than median, annual average prices for water allocations could be lower than $100 per ML.”
Continuing challenging conditions in the dairy industry may see an overall market softening, but Mr Olszak said continuing interest from horticulturalists – particularly nut producers – had the potential to limit further falls. “In addition, there are also a number of large water investment plays in the market right now,” he said.
“Aither expects that these investments might also act to underpin entitlement prices across the southern Murray-Darling Basin.”