CONTRASTING water availability conditions in the Murrumbidgee and Murray systems mean traders will be keenly watching the Murrumbidgee inter-valley transfer (IVT) account balance.
Murrumbidgee licence holders have opened the 2016-17 water year strongly, with allocations of five per cent for high security and 20 per cent for general security. In stark contrast, NSW Murray high security commenced with 97 per cent, while general security did not receive any allocation.
Murray irrigators are hoping for substantial storage inflows over the coming months.
Differing water availability in the Murray and Murrumbidgee will likely see a large price difference between the two valleys. Given the likelihood of lower prices in the Murrumbidgee, we are already seeing demand from Murray irrigators hoping to transfer water out later in the season.
The IVT balance, which tracks net allocation trade between the Murrumbidgee and Murray Valleys, remains at 100GL – the maximum. This means that 100GL of trade from the Murray into the Murrumbidgee can occur, while trade from the Murrumbidgee to the Murray is closed.
Murrumbidgee to Murray trade will reopen when trade into the Murrumbidgee reduces the IVT to 85GL.
When Murrumbidgee to Murray trade opened last season, irrigators scurried to transfer water from the Murrumbidgee to the Murray, as a result of significant price differences between the two systems, which topped $50ML, rapidly reaching the IVT limit and reclosing trade.
I think the IVT needs to be watched closely by irrigators in both the Murrumbidgee and Murray, as any opening will provide good trading opportunities across both markets, in a year where water will be scarce and expensive in the Murray.
The gap between Murrumbidgee and Murray storages has widened significantly from this time last year. Murrumbidgee total storage volumes are up 25pc year on year, while Murray storages are down more than 10pc. If the gap persists or widens, there is likely to be strong demand to transfer water from the Murrumbidgee to the Murray system.
The Barmah Choke Balance – which restricts Murray trade above the Barmah Choke to below the Choke – opened this season on 26.07GL, and is already down to 22.33GL. If it reaches 0GL, trade downstream will close for the first time since 2011.
- Jack Bennetto is the business development manager at H2OX which operates a water exchange for the electronic trading of entitlements and allocations.