Outlook, water markets

Seasonal Water Usage Update – March 2018

27 March 2018

Welcome to another update outlining water availability across the sMDB.

Aside from looking at the current situation, we will also look forward to the 2018/19 season now that Victoria and NSW authorities have released initial determination outlooks.

Current prices and availability

So what’s been driving the market in the last month or so?

Allocation prices climbed dramatically during March, driven by demand for autumn watering. The MIL exchange traded $10+/ML over Victorian Murray prices for much of the month as irrigators sought smaller volumes to finish off summer crops.

As at 23 March the monthly volume weighted prices were $95 in Goulburn, $117 in Vic Murray, $116 in NSW Murray and $148 in Murrumbidgee. These prices represent a roughly $10/ML increase over the February prices.

Year to date, the volume weighted average allocation price (VWAP) is just over $119/ML across the sMDB (excluding trades inside irrigation corporations). The VWAP for the last two years was $77/ML (2016/17) and $209/ML (2015/16).

Looking at water availability, there have been slight improvements to water availability in the NSW Murray and Murrumbidgee due to incremental increases in allocation. According to the NSW water register only a marginal amount of water usage has been recorded since the middle of February in NSW Murray.

<<Note: The “Available” water for Goulburn and Murray in the chart below is incorrectly reported. See the April update for the correct volumes. The Usage values are correct. Values below have been corrected accordingly.>>

Water use in Victoria is tracking close to our earlier estimates although Goulburn usage is higher than originally anticipated as stated in our previous report. Given how dry summer has been and the forecast for a late break (see below), we anticipate a good volume of water being consumed in the next month, especially in the Goulburn system where dairy is the predominant industry.

With respect to carryover we anticipate a total of 1,850GL 1,300GL to be carried over by irrigators at the end of this season (about 800GL less than last season) in the following systems;

  • 450GL 150GL in the Goulburn
  • 350GL 100GL in Vic Murray
  • 700GL in NSW Murray
  • 350GL in Murrumbidgee

This is substantially marginally higher than our estimate in March (1,100GL) which was based on far higher water use. Suffice to say there is still 6 weeks left in the current season and a large volume of water can still be used if it remains dry.

Climate outlook

There’s no doubt its been a dry 2018. If you look at the rainfall over summer, the majority of the sMDB received above average rainfall however this is seriously skewed by the large rainfall event at the beginning of December. Rainfall in January was below average across the irrigation areas while February saw rainfall deficits of 10-50mm across the whole basin.

As a result of the lower rainfall, streamflows also subsided well below mean flow levels. The climate outlook aver the next 3 months also means streamflows are estimated to be on the low end of the historic range.

Looking at climate models over the longer term, the Very Fast Break newsletter provides an excellent summary of the various models as shown in the following table. For the March-May period there is good consensus among the models. The Pacific and Indian oceans are in relatively neutral phases and only two models are predicting lower than average rainfall over the period and this aligns with the BOM’s recent climate update.

Seasonal outlooks

The NSW authorities released their preliminary water availability outlooks for 2018/19 on 15 March. The dry start to the calendar year and climate outlook has resulted in a very conservative projection on seasonal determinations should it remain dry.

In the Murrumbidgee, 32% allocation against General Security is expected by November under an dry inflow scenario. To date they have been experiencing very dry inflows which, if they continued, would only see allocations reach 17% by November.

In NSW Murray, the outlook is a little better. Dry inflows have been experience to date and if they were to continue allocations are expected to reach 30% by the start of November. Even with average inflows allocations are only expected to reach 42%.

The chart below summarises the determination outlooks under extreme dry (red), very dry (orange), dry (yellow), average (blue) and wet (green) scenarios. If the inflows continue tracking on the dry-very dry scenarios, water availability at the beginning on 2018/19 is likely to be tight and carryover will play an important role.

Securing water for next season

In light of the outlooks above, ensuring you understand what water you’ll have available from your entitlement under various scenarios and how you are going to make up any shortfalls is essential.

H2OX have summarised the various water products available in the market. Pricing is available on all these products. Call H2OX on 1800 988 118 to discuss the options.