For Murray-Darling Basin ag investors, 2022 began full of hope. With water availability as high as ever, enormous winter and summer cropping programs were expected and positivity reigned supreme.
As the year progressed, a rare triple La Niña brought record-breaking rainfall and full storages across the Basin. This proved a mixed blessing for ag producers, many of whom have since struggled to access country to harvest, let alone prepare for summer crops.
Widespread flooding has challenged the ag sector and communities across large parts of the Basin, and continues in some parts of the Murray, where water levels are yet to peak. Like 1956 and 1973-74, 2022-23 will be etched in the psyche of irrigators and river communities for decades to come.
With high water availability throughout 2022, unsurprisingly water allocation markets have not been front of mind for many and prices fell across the entire year. Despite this, water entitlement prices have remained steady, with some material gains in High Security Lower Murray entitlements in Victoria, New South Wales and South Australia.
General Security water entitlements in the New South Wales Lower Murray have seen the most significant price gains, along with Low Reliability entitlements in Victoria – especially in the Goulburn system. The latter price rises were driven by a new Goulburn to Murray trade rule, improving confidence that water could be moved to the Murray at the start of the season.
Notwithstanding record wet conditions, 2022 will be remembered for more than just flooding rains.
In Australia’s first federal election since the beginning of the pandemic there was a massive 18-seat swing in the lower house away from the Coalition towards Labor (+12 percent), Greens (+300 percent) and independents (+140 percent), with the Greens also winning three new Senate seats. The electorate spoke and clearly expects an increased focus on climate and the environment.
Enter Tanya Plibersek, Australia’s new minister for the environment and water, emboldened to deliver the Basin Plan in full, including the controversial 450GL water recovery, noting that “all options” were on the table. The clock is now ticking towards June 30, 2024, when according to legislation, the Basin Plan must be delivered to avoid penalties written into the Plan.
The minister’s first meeting with state ministers (MinCo) in October was congenial, with in-principle agreement to the recommendations of the Australian government’s water market reform adviser Daryl Quinlivan.
MinCo agreed to the Commonwealth acquiring around 50GL, with 10GL of that to be recovered from the Lower Murray and the balance from the Northern Basin. These purchases would finalize the “bridging the gap” local targets under the Basin Plan and are a step in the right direction – however, it remains to be seen if the collegiate nature of October’s MinCo will stand the test of 170GL-300GL buybacks from the Southern MDB should the SDLAM targets not be met.
The La Niña is tipped to break down in the coming months and regardless of what happens next weather-wise, high storage levels mean that water availability should be high for the next two years in the Southern MDB, especially in the Murray.
Ben Williams is a principal and water markets lead at consultancy Aither