Date: 9 Oct 2019
Publisher: The Australian
Link:
https://www.theaustralian.com.au/nation/politics/littleproud-hints-at-intervention-over-water-baron-profiteering/news-story/b35c204ad4c0f2cb0d5d282766e81f4eTitle: Littleproud hints at intervention over water baron profiteering
The federal government has warned professional investors against profiteering in the water market, for the first time suggesting that while their actions may be lawful, they may not be acceptable.Water Resources Minister David Littleproud told The Australian he did not want to see big investors profiting at farmers’ expense.Indicating the government may intervene, Mr Littleproud said he was “committed to making sure the water market is a level playing field where family farming operations can get water at a fair market price”.
“I do not want to see traders, brokers or any major market players pushing up water prices as water is a critical resource.”Mr Littleproud’s remarks followed a closed-door confidential meeting in the Victorian town of Mildura on Tuesday with farming leaders who briefed him on alleged market manipulation they claim has resulted in a squeeze in the market for irrigation water and a spike in prices.A farming source said the meeting went for two hours, and citrus, nut, olive, stone fruit and grape grower representatives one after another said the skyrocketing price for irrigation water was having enormous adverse financial, social and psychological effects on rural communities.The source said Mr Littleproud indicated he would explore if any interim measures could be introduced to mitigate the crisis.
Farm groups claim “water barons” who do not own agricultural land have introduced techniques from the futures and derivatives markets to drive up prices of water in the southern Murray-Darling Basin from a long-term average of $135 a megalitre to $800.In particular, they point to Duxton Water Ltd, a public listed company set up after the state and federal governments in 2014 removed the last barriers to non-farm investors entering the water market, fully dismantling the previous system where water rights accrued directly to ownership of agricultural land. In three years Duxton Water, established by high-flying former international Deutsche Bank equity and derivatives traders and managers of funds based in the Cayman Islands, acquired 74 billion litres of permanent water entitlements, 12.5 billion of which the company obtained in the six months to June.
In the first six months of this year, during the height of the worst drought on record, Duxton Water more than doubled its profit compared with the corresponding period last year to $2.5m.It reported a total return for investors for the year to June of nearly 30 per cent.Duxton Water says it now leases half its water to farmers on medium and long-term contracts, and the goal is to increase this proportion over time.It denies hoarding water, and says it is a long-term investor rather than a speculator.Asked whether he was concerned non-farming investors such as Duxton Water were lawfully buying huge amounts of long-term and spot-market water and holding at least some of it from one year to the next, Mr Littleproud said: “I have asked the Australian Competition and Consumer Commission to investigate the water market.”
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