Water entitlements: Big irrigators gamble on good rain ( Weekly Times 14/6/2018)

https://www.weeklytimesnow.com.au/news/national/water-entitlements-big-irrigators-gamble-on-good-rain/news-story/8aa94bff16b8e56d870af0b5df126139 Water entitlements: Big irrigators gamble on good rain AUSTRALIA’S largest almond and olive operations are embarking on a high-risk strategy, shunning owning water entitlements and instead opting to buy or lease other irrigators’ water each season in the hope prices stay low. Olam, Select Harvest, goFarm, Boundary Bend Olives and others are minimising the volume of entitlement they hold, due to the poor return on high security water worth $4000 a megalitre or more. Paul Thompson. “Our aspiration is to own about 30 per cent of our needs (as entitlement), which is reviewed annually,” Select Harvest managing director Paul Thompson said. But valuer Sam Paton said the strategy should set off alarm bells among investors, given the prospect of drought driving up water prices. “It’s scary stuff from an investors’ point of view, looking at what’s happening in Queensland and NSW, even northwest Victoria,” Mr Paton said. “What would happen if the water price hit $1000 or more a megalitre, even if we had just a pale imitation of the millennium drought?” Broker H2OX is already reporting the water market is bubbling, with forward prices of $230/ML for the opening of next season. In March water prices averaged $113/ML. Irrigators are starting to worry as the long dry season bites and talk of drought spreads south from NSW and Queensland. In early 2009 during the millennium drought allocation prices hit $907/ML, at a time when the Federal Government was just beginning to buy water out of the southern Murray Darling Basin. The Government has since bought out almost a million megalitres from the southern basin, plus another 722,000ML transferred to the environment. Yet in the past decade the area under almonds and olives has soared, along with strong growth in demand from other horticultural crops, such as table grapes, citrus and avocadoes. Water resource managers fear the horticultural boom below the Murray River’s Barmah Choke is unsustainable and will not only price pasture-based farmers out of the market, but end up leading to horticultural irrigators battling it out to keep crops alive. An analysis by a southern basin’s water corporation resource manager found permanent plantings may soon use every drop of water allocated against entitlement in a full allocation year. The analysis showed that while 1470gigalitres of entitlement is availableto irrigate permanent plantings, 1100-1200GL is being used, with demand forecast to grow by another 200-300GL as existing and planned permanent plantings mature. The resource manager feared even a moderately dry season could lead to a massive water price hike as the horticulture sector clambered on to the water market to protect their harvest or survival of their plantings. 1470 gigalitres of entitlement is availableto irrigate permanent plantings. This includes 650-660GL Vic high reliability, plus 420GL SA high security and 200GL NSW Zone 7 entitlements (Tooleybuc and Euston). Another 100GL is available from the Murrumbidgee each season, plus 200GL from the Goulburn (less 100GL of tagged entitlement already used in the Murray) 1100-1200 gigalitres is currently used for permanent (plus some annuals, such as Torrumbarry dairying) in NSW, Vic and SA. Demand is forecast to grow by another 200-300GL as existing and planned permanent plantings mature. Growth is based on 4500ha planted in 2016-17, plus 15,500ha over next four years). As the gap narrows, the resource managers fear even a moderately dry season could lead to massive water price hikes as the horticulture sector clambers onto the water market to protect their harvest and at worst the survival of their plantings