Warning over water plays
The Federal Government has been warned that intervention in the water market could have “dire consequences”.
Rumours are swirling that the Commonwealth wants to restrict water investors that do not irrigate from buying water on the temporary market, or accessing carryover.
Rob McGavin, CEO and co-founder of Australia’s largest olive producer, Boundary Bend Limited, said growers want Mr Littleproud to address the “unintended consequences of some of the trading rules”.
Boundary Bend Estate buys temporary water each year, claiming that owning permanent water entitlements does not give it enough financial security in dry times.
“There is a lot of stress out there with people undecided what they should do, and some people don't have a choice because they just can't afford to water, so they need to make decisions about walking off the land, pulling their trees out [and] trying to mothball them effectively,” Mr McGavin has told the ABC.
“In Victoria, if we're really lucky, allocations might get to 50 per cent [this season], which means that even if you own all your own water, you still need to get 50 per cent on the temporary market so it's hitting people really hard.”
But other say irrigators benefit from the role investors play in the market, and that restricting them would devalue the commodity for growers.
Australian Water Brokers Association president Ben Williams said “one section of the irrigation community” is “getting a great deal of air time both in the media and at state and Commonwealth government level”.
“There's a lot of people who, over the course of the past three or four years, have signed up to forward-allocation contracts, for instance with water market investors or so-called speculators,” Mr Williams told reporters.
“That has provided those irrigators with absolute certainty that they know how much water they're getting, when they're going to get it and at what price.
“If you were to exclude water funds and so-called speculators from holding allocation and being able to carry over, you would limit the ability for them to be able to offer those products to irrigators in subsequent years or within the season.
“I think it will have dire consequences for a number of irrigators who rely on those products to manage their water requirements throughout the year and between seasons, and also their cash flow.
“Last year, as an example, forward contracts were signed up to between $500 and $600 per [megalitre] for water delivered this year.
“Those deliveries are happening now and have been happening since the start of the season.
“So, in a market that has the spot price at $790 to $805 [per megalitre below the Barmah Choke], some irrigators who had the foresight to sign up to forward contracts at $600 are certainly in the money.”
Mr Williams said the uncertainty and rumours of government intervention is already affecting trade.
“There are a number of irrigators who are holding off purchasing allocation water in the hope that either state or federal government intervention may make some difference in terms of the price on the allocation market,” he said.
“I don't think there's much secrecy around what the groups that met with the Minister are wanting — that's a known — [but] how government would achieve those desires remains to be seen.
“There's some level of concern around how they would go about any changes to entitlement characteristics for individuals within the market.”
Mr Littleproud has been holding closed-door meetings with representatives of horticulture commodity groups, and has not given any details on his current considerations.