Dairy, water markets

Water shares: Irrigators rush to buy dam storage space

14 June 2017

PETER HUNT, The Weekly Times
June 8, 2017 12:00am
THE value of the Southern Murray Darling Basin’s lowest-yielding water entitlements has tripled as irrigators scramble to buy storage space in the Hume, Dartmouth and Eildon dams.

Victoria’s low-reliability water shares have surged from $100-$120 a megalitre five years ago to $300-$350 today.

Irrigators and investors are snapping up the shares as a cheap means of carrying over and securing water from this season to the next.

“People are waking up to the value of these shares as a de facto storage right,” Victorian Farmers Federation Water Council chairman Richard Anderson said. “I wish I’d bought some (more) years ago. I’ve had about 200 calls from people asking where they can get or lease them.”
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LRW shares yield little water, but irrigators have learnt their real value is as a holding or parking right in the Basin’s big dams.

Hundreds of irrigators, environmental water holders and water corporations learnt the painful cost of not holding extra storage capacity last September, when they lost $67 million of water that spilt out of Hume Dam.

In May last year irrigators had assumed they could hold their excess water in spillable water accounts, given Hume was at about a fifth of capacity.

But once Victoria’s share of the Murray storages did spill on the back of massive inflows, irrigators started losing this extra water.

Independent Aither water economist Daniel Baker said the unique carryover characteristics of Victorian LRW shares were being used by:

INVESTORS looking to structure more sophisticated forward or carry-over lease products.

IRRIGATORS or big agricultural enterprises looking to increase their ability to carry over water with low spill risk.

The 2007-08 unbundling of water from land means investors can own LRW shares, incurring about $10 a year in carry-over and storage fees.

H2OX water broker Lex Batters said some big irrigators held large parcels of LRW shares that they could load up when water was cheap and carry into future seasons.

Temporary or allocation prices on the Murray River are about $20-$25 a megalitre, compared with $150-$250 in 2015-16.

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