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.
Victorian data starts in 2007/08.
|Mode||Nov, Aug & Jul (2)
||May and July (3)
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.
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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