Research by the Australian Bureau of Agricultural and Resource Economics (ABARES) has found that southern Murray-Darling Basin water buybacks and on-farm efficiency programs have resulted in higher prices.
Executive Director of ABARES, Steve Hatfield-Dodds said the study separated the effects of water recovery on water allocation prices from seasonal variations in water supply and expanding perennial crops.
“Seasonal conditions are the primary driver of annual variation in water prices,” Dr Hatfield-Dodds said.
“Both direct water buybacks and on-farm infrastructure programs put upward pressure on water prices. ABARES finds that total water recovery to date, on average, has added around $72 per megalitre to allocation prices.”
He said on-farm infrastructure programs provided significant benefits to the farmers who participated through better productivity and profitability.
“That means they want more water and will pay a higher price,” Dr Hatfield-Dodds said.
“This extra demand puts more upward pressure on allocation prices than an equivalent amount of water buybacks,” he said.
“ABARES finds the price effect of on-farm irrigation infrastructure projects is about double that of buybacks, per unit of water recovered.”
He said the study also found that off-farm infrastructure projects and rationalisation of irrigation networks were best placed to avoid price effects, but were typically more expensive than buybacks and might be difficult to negotiate.
“Other factors putting pressure on water market prices include the expansion of high-value, water-intensive crops such as almonds,” Dr Hatfield-Dodds said.
The ABARES study report can be accessed at this PS News link.
