Rising irrigation water prices causing headaches for the Mildura horticultural community: HTW rural
The price of leasing irrigation water this season continues to rise, causing plenty of headaches for the Mildura local horticultural community, according to the latest Herron Todd White (HTW) rural report.
"In mid-August, temporary water was trading for around $625 per megalitre which was well above prices we have seen in recent years and reflected concerns that the supply of water would be tight this season," the valuation firm said.
"The largest supply of leased water generally comes from New South Wales Murray General Security Licence holders and by mid- August it was clear that this class of entitlement was likely to have a zero allocation for the second year in a row."
The report suggests an allocation of even 5% or 10% would have brought a significant volume of water onto the market and eased prices, however that is not going to happen this season.
Over the past two months the position has worsened, with the realisation that Victorian licence holders are now unlikely to get a 100% allocation and the cost of leasing water has risen another 30%, to now be around $800 per megalitre, HTW said.
"It is normal for the Victorian resource manager to open the season on 1 July with a low allocation, which then increases as the extent of winter and spring rainfall becomes evident," it said.
"Inflows to the main storage dams (Dartmouth, Hume and Eildon) have been dismal this season and holders of Victorian Murray licences are now faced with the very real possibility that allocations might only reach 50%. They have gradually crept up to 40% at the time of writing.
"This creates the double whammy of putting many normally secure irrigators into a position of having to lease water, as well as significantly reducing the supply available from licence holders who would otherwise be in a position to lease out all or part of their entitlement."
The Murray Darling Basin Authority publishes a weekly report showing inflows to the Murray River system and the latest chart highlights the current predicament.
"Our region has faced this position before, most recently during the millennium drought, when irrigators endured two consecutive years when allocations for Victorian Murray licences reached 43% and 35% respectively. That event was brutal and forced many irrigators to abandon their plantings and cease farming," the valuation firm said.
The key difference this time around is that commodity prices are much better than they were in 2007 and 2008 and local irrigators can now justify spending the exorbitant sums required to maintain production from their citrus, vines and almond trees, the report noted.
"Of course, this only increases demand, which in turn increases the cost and helps explain the current predicament," the report said.
"The only thing which will prevent the cost increasing to $1,000 per megalitre by mid-summer would be above average rainfall in north-eastern Victoria over the coming summer, which at present seems very unlikely.
"On a more positive note, we are seeing some diversification in our farming base with the establishment of a large scale medicinal cannabis facility just outside Mildura."
The development is being undertaken by Cann Group Limited, who has purchased a modern juice processing facility that was originally developed to process carrot juice and started construction of a three-hectare glasshouse facility.
They are well underway in their plan to create a vertically integrated business that can tap into the growing global demand for medicinal cannabis.
