The review of 2020-21 and outlook for the current year by Aither has found large areas of the Murray-Darling Basin received above average rainfall most months between July 2020 and March 2021.
Regular rainfall and good inflows into storages improved water supply conditions in all systems across the southern MDB compared to the past three water years.
“Average water allocation prices started the water year just above $300 per Ml, and then tumbled throughout the year as allocations to entitlements increased and timely in-crop rainfall arrived,” the report stated.
“Binding trade constraints in the first half of the season created price differentials between upstream zones and the lower Murray again.
“But, with increased water supply in all zones, the differentials were not as large as in 2019-20 (in absolute terms).”
The Aither report found prospects for a good year ahead, with large volumes of carryover and a favourable outlook for spring rain meaning that many irrigation businesses are set for a successful year.
Annual croppers will be gearing up for a big season and hoping that further inflows extend the good times for another year or two.
“In allocation markets, quick increases in allocations to most entitlements in the southern Murray-Darling Basin in the first six weeks of the water year mean many market participants can afford to be patient. As a result, allocation markets have generally been quiet.”
The report postulated that if average inflows eventuated from here (early August 2021), by peak irrigation season, consumptive water availability could be higher than the volume available by mid-December in 2020.
“If this happens, allocation prices could settle around or below prices seen in the final months of 2020-21. It will likely take a marked return to drier conditions to push prices up from current level, although the key driver to watch will be buying demand from annual croppers as summer approaches.”
In the section on storages, the Aither report found 2020-21 ended with the largest volume held in southern MDB storages since 2016-17.
After rainfall in early 2020 wet the catchments, good run-off meant that southern MDB storages began to replenish.
“At the start of the 2020-21 water year there was approximately 680 Gl more water held in southern MDB storages compared to at the start of 2019-20.”
Water facts from 2020-21
● Estimated value of commercial allocation trade in major southern MDB trading zones: $189 million.
● Annual average southern MDB allocation prices: $95/Ml in NSW Murray (above Barmah) to $191/Ml in SA Murray.
● Estimated value of major southern MDB entitlements on issue (including environmental and Victorian water corporation holdings): $26.5 billion.
● Aither Entitlement Index (AEI) June 30, 2021: 251 points (up six per cent over 12 months).
● Value of total entitlement transfers: $744 million.
● Total volume of entitlement transfers or trades (outside of irrigation corporations): 239 Gl (down seven per cent on 2019-20).
● Entitlement market turnover: four per cent.
● Average annual high security and high reliability entitlement returns (sale of allocations): between one and three per cent.
Source: Aither
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