Aither’s water markets advisory lead Ben Williams said “wet conditions continued across the southern Murray-Darling Basin in 2022-23, increasing water supply and reducing irrigation water demand”.
“This led to water allocation prices tumbling, with the annual volume weighted average price 62 per cent lower than last year and the second lowest since records began.”
A third successive year of wet conditions brought extensive rainfall across the southern Murray-Darling Basin, resulting in record inflows to storages and the worst flooding in the Murray system for 50 years, the report said.
The conditions affected on-farm activity, leading to both crop quality and harvest issues.
Historically high water availability and opening allocations to entitlements saw allocation prices open at their lowest level since 2013-14. Prices continued to trend down across the year, finishing 80 to 94 per cent lower by June 2023.
Looking ahead, Mr Williams said “very strong opening allocations and the highest volume of water in storage on record mean low water allocation prices are set to continue in 2022-23”.
“Despite the possibility of an El Niño developing, the good times for irrigators look set to last at least this year.”
While entitlement prices appreciated slightly through the first half of the year, the last four months saw entitlement prices begin to soften.
The Aither Entitlement Index dipped in 2022-23, experiencing a rare decline of -4 per cent. Following a decade of 21 per cent compound annual growth, and despite reaching an all-time high in February 2023, the 2022-23 water year marks the first time the AEI has fallen annually since 2012-13.
The decrease reflects that water entitlement values are not immune to economic challenges, including interest rate increases, flagging commodity prices and supply chain issues, the report said.
Mr Williams said entitlement markets were likely to remain soft until there was an improvement in economic conditions.
“However, delivery of the [Murray-Darling] Basin Plan remains the wild card.
“Entitlement prices are likely to rise if the Australian Government becomes an active market participant attempting to recover entitlements to meet basin plan targets.”
Find out more at: www.aither.com.au
