Water brokers say a number of annual crop irrigators with minimal to zero general security allocation are now considering entering the permanent water market, despite the huge price tag.
Water broker, Tom Wilks, of Wilks Water, Wagga Wagga, said securing production was on a lot of people's minds.
"Particularly the operators with scale are looking at ways to sure up their supply of water, it's the key ingredient to growing an irrigated crop, so everyone's looking at their options," Mr Wilks said.
"Irrigators are seeing that ownership of water is becoming more concentrated and very likely down the track, if they want to buy permanent water, it might not be there to buy."
Simo Tervonen, from independent consultant company, Marsden Jacob, said for some growers, permanent water, through high security or groundwater rights, looked attractive in comparison to being reliant on the temporary market, which peaked this year at $700 a megalitre.
"Some people have spent a small fortune, close to half a million dollars on temporary water in just one year, and we're hearing people say we never want to do that again, I want to drought proof myself more, even though permanent water is expensive, in the long run it's still worthwhile," Mr Tervonen said.
"In NSW Murray and Murrumbidgee you're pretty much guaranteed a 95-97 per cent allocation for high security permanent water year on year, so it's an insurance policy."
Yet, the price tag to enter the permanent water market is nothing to be sneezed at. High security water has been selling on the Murrumbidgee for $7000/ML and Mid Murrumbidgee Zone 3 Alluvial Groundwater recently sold for a record price of $2000/ML.
Griffith irrigators, the Salvestros, crop 12,000 hectares of cotton, wheat and some grapes. Dean Salvestro said a third of his water was permanent, with a mixture of high security and ground water. But, he bought in when the price was more reasonable and he said it was not something he would consider now, despite, the benefits he's seen from holding permanent entitlements.
"We can sign forward contracts for wheat and cotton and attract higher pricing because you have certainty of water," Mr Salvestro said.
"But, the price of high security water is getting to the stage that it's not really viable for a broadacre farmer to own, it's more of a horticultural play."
The high security water price has tripled in some zones over the past five to six years, a trend Marsden Jacob said is mostly due to the increase of permanent plantings.
But Rod Carr of Marsden Jacob said permanent planters don't hold all the cards in the water market.
"Permanent planters have the capacity to pay for water, but also have more need for water, because you can't deprive that tree or a vine of water completely, whereas the annual guys have the ability to step in and out of the market," Mr Carr said.
Mr Wilks said some irrigators also have the capacity to step in and out of different water markets.
"Water is nearly without borders now, a lot of irrigators own water across different water sources and different states as a way to manage their risk," Mr Wilks said.
But with trade limits, which markets you can buy into all depends on what zone you're in.
Chris Olszak of water and market advisory firm Aither said some irrigators were looking to sell their general security water rights to finance the purchase of higher reliability water.
"The strongest upward entitlement price pressure over the last year has been for higher reliability entitlements held below the Choke and in the Murrumbidgee," Mr Olszak said.
"Whereas general security prices seem to have declined from their peak or plateaued as a result of limited prospects of immediate returns and concerns about long term reliability and value for money."
Another option for irrigators who want to secure water, but cannot afford to buy permanent entitlements, is leasing high security water rights, usually for a period of three years at a set price. In the NSW Murray and Murrumbidgee valleys, a three year lease was costing about $375-$420/ML. Mr Wilks said most people have eyes wide open when they go into leases.
"If it does rain and temporary water's cheap, well they can increase production, put another field in," Mr Wilks said. "Every lease I've ever done there's been one year where the lease was cheap, one year it was dear and one year it was about right, that's part of the three year thing - it averages out."
Water investors look outside the Murray Darling
Mr Tervonen said although irrigators are beginning to look at permanent water for its investment purposes as well as an insurance policy, it may no longer be an attractive option for hold and sell investors.
"If you were a pure investor, starting from scratch today there would be a very high risk, because they usually look for a six per cent return on investments annually, so if you're buying permanent water at $7000 it's very risky in terms of achieving that return year on year," Mr Tervonen said.
Mr Wilks agreed pure investors were backing away from Murray Darling Basin water.
"When you talk to them about the fluctuations in the water price they often rethink. It was only 2016 that temporary water was $5/ML and I couldn't sell it," Mr Wilks said.
Mr Carr said investors were now looking to buy water outside the Murray Darling Basin, in Queensland or Western Australia. "We get very Murray-Darling Basin centric, but these guys are looking much more broadly than that," Mr Carr said.