When is the Best Time to Trade Temp Water?

By | 14/07/2018

I’ve heard many theories on when is the best time of year to trade temporary water. Some say summer has the highest prices because that’s when most water is used. Some say the end of the year has the highest prices because there are irrigators needing to buy for their overuse. Some say it’s the beginning of the year. This article attempts to find who, if anyone, is right.

I’ll be assuming that to make a trading decision, you have no other knowledge apart from what month it is. So what I’m going to find is which month has the highest prices and which month has the lowest prices.

Here are the tables showing which month had the highest and lowest volume-weighted average prices for each water year. At the bottom of the tables is the mode (the most common month) with the number of occurrences.

Murray

Year Highest Lowest
2004/05 August March
2005/06 August June
2006/07 May September
2007/08 October February
2008/09 September February
2009/10 August May
2010/11 July June
2011/12 September April
2012/13 March July
2013/14 January July
2014/15 June July
2015/16 November July
2016/17 July May
2017/18 June December
Mode August (3)
July (4)

Murrumbidgee

Year Highest Lowest
2004/05 August March
2005/06 September March
2006/07 January August
2007/08 December March
2008/09 August February
2009/10 September March
2010/11 August May
2011/12 August March
2012/13 February March
2013/14 January May
2014/15 May July
2015/16 January September
2016/17 July May
2017/18 May July
Mode August (4)
March (6)

Goulburn

Victorian data starts in 2007/08.

Year Highest Lowest
2007/08 November January
2008/09 September March
2009/10 August April
2010/11 August April
2011/12 July May
2012/13 March July
2013/14 January May
2014/15 June July
2015/16 November July
2016/17 July May
2017/18 June December
Mode Nov, Aug & Jul (2)
May and July (3)

Analysis

The only modal value (most common month) which stood out was March in the Murrumbidgee. It was unlikely to be random. If March had a 1 in 12 probability of being the lowest priced month in a given year, the probability that it would appear in six or more years is 0.056 %. This is from the cumulative binomial probability. The probability that any month would appear in six or more years is greater than that, but still very low.

Conclusion

If the past is a guide to the future, March is the best month to buy in the Murrumbidgee. However, the Murrumbidgee market has changed in recent years with the growth of cotton plantings. Does that affect the best time to buy? That’s uncertain.

With the other valleys, there is no month that stands out to buy or sell.

Predicting the water market is like trying to predict the stock market and the weather at the same time. The best time to trade is when you feel the price is good for you. No one can precisely predict the peaks and troughs of the market. Making decisions based on the market price and your own requirements is much more wise than picking a particular time of year.

 

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