Recently, ABC’s Four Corners ran a story on irrigators in the Northern part of the basin. It covered compliance issues and loopholes that cotton growers were using. You can view the show online here. I’ve been asked a few times what it means for Southerners.
The volumes involved in the story are a small in the whole scheme of things. Furthermore, the Darling contributes little to the Murray and water used that far upstream is not a huge impact to the Murray. That said, what the government does in reaction to the story will impact everyone.
Permanent Market Impact
Earlier this year we heard calls for more water recovery in the Murray-Darling Basin. There are plans for a further 450 GL of recovery. Typically, water recovery pushes permanent prices up.
What I think will happen is further recovery will be put on hold while investigation into the Northern irrigators is under way. The focus on water recovery will shift from the South to the North. So this will push the permanent market price sideways, rather than moving up with the recovery.
Temporary Market Impact
I think there will be stricter monitoring of compliance for all irrigators. Inevitably, there have been some irrigators in the South doing the wrong thing, so this year they will be scrambling to buy temporary water to “balance their books”. They’re in a minority in the South, so they won’t have a huge impact. This will push temp prices up a bit.
What’s happened so far
This story came out not long after the Federal government committed itself to buying back Lower Darling water. They bought 22 GL from Webster at a high price, who was also one of the subjects of the show. I think if this story came out earlier, there would have been focus on the issues highlighted in the story rather than buying back water. It was good timing for Webster.
A $12k fine was handed out a few days before the show aired to a cotton grower.
In response to the show, DPI Water has appointed Ken Matthews to lead an investigation into the issue. Mr Matthews used to be on the board for another water broking firm.
Overall, the story was a bit of a beat up. To an individual, the volumes involved were huge, but small for the system as a whole. The subjects of the show will have the book thrown at them, but the impact on the average irrigator is overstated.
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