Water allocation prices forecast to remain low across the southern Murray-Darling Basin in 2021-22
31 March 2021
The latest ABARES Water Market Outlook report indicates water allocation prices in the southern Murray-Darling Basin are likely to remain low in 2021–22.
Water prices have fallen sharply in 2020–21 from the highs experienced in 2019–20, as the recent La Nina event has led to more favourable seasonal conditions and irrigation water supply.
“This has allowed allocations across all major catchments and securities in the sMDB to reach levels above the historic average,” ABARES’ senior economist Mihir Gupta said.
“The average water price across the the southern Murray-Darling during 2020–21 is currently $154 per ML, much lower than the annual average of $587 per ML experienced in 2019–20.”
The Water Market Outlook, released today, provides a range of possible allocation prices for 2021–22 under wet, average, dry and extreme dry seasonal conditions.
In the wet and average scenarios, prices are likely to fall in response to improvements in water supply, with ABARES estimating average annual prices of $57 per ML and $114 per ML respectively.
Lower water prices would support production of agricultural commodities which are typically more sensitive to prices, such as rice and cotton.
“The volume of water carried over into 2021-22 is likely to be high, based on the volume of water that has been allocated but not used so far in 2020- 21,” Mr Gupta said.
“The additional water carried over will help keep prices below 2019-20 levels, even in a dry or extreme dry scenario, where prices are forecast to reach $284 per ML and $323 per ML respectively.”
The latest ABARES Water Market Outlook and accompanying dashboard visualisation can be accessed on the ABARES website.
As part of the ABARES Perspectives series, these results will be discussed in more detail at a webinar at 1pm on Thursday 1st April 2021.