The 2015-16 water year in the southern Murray-Darling Basin was characterised by substantial price increases for water entitlements and allocations along with amplified variability in allocation prices. Price paths for both entitlements and allocations observed in 2015-16 continue recent trends of rapid increases from a low point in 2011-12. This trend has been driven primarily by decreasing water allocations to irrigators and the emergence of new high-value permanent planting developments,

• In 2015-16 the total value of commercial trade in the southern Murray-Darling Basin was approximately $400 million in entitlements and $260 million for allocations.
• In 2015-16, water allocation prices began around $200 per ML and peaked at about $300 per ML in November 2015 and then again at approximately $250 per ML in May 2016 before declining quickly to below $200 per ML at the end of the water year.
• Prices for some entitlement types (primarily higher reliability) increased by as much as 70 per cent between 2014-15 and 2015-16 – based on register data.

There has been a dramatic turnaround in climatic conditions in recent months. Aither expects lower prices for water allocations in 2016-17 compared to 2015-16. At the end of July 2016, water allocations across the southern Murray-Darling Basin were trading below $150 per ML. Based on average and wet allocation scenarios adopted from state authority outlooks and assuming median in-crop rainfall across the remainder of the 2016-17 year, the model estimates an annual average price of approximately $170 per ML under average conditions and $135 per ML under wet conditions. If rainfall for the remainder of the year is substantially higher than median, annual average prices for water allocations could be lower than $100 per ML in 2016-17. Lower entitlement prices observed at the beginning of 2016-17 could be the result of a natural correction following a period of rapid price increases. Observed declines in entitlement prices in Victoria, potentially driven by a recent deterioration in economic conditions in the dairy industry, may be representative of an overall market softening across the southern Murray-Darling Basin in the 2016-17 water year. However, interest from investors and large horticulturalists, is likely to underpin the market and limit the extent of price reductions.

Download the 2016 Water Markets Report

Water Markets Report 2016
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