AGRICULTURE'S current boom with solid production, good water allocations and high commodity prices is fantastic for industry participants but it is set to create higher demand for irrigation water than can be delivered which government agencies say will require reform of the water trading system.
A team of water experts, assembled at the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Outlook conference earlier in the month said reform of inter valley water trade (IVT) regulations in particular was critical to a more equitable water market.
IVT rules were a key focus in last year's Australian Competition and Consumer Commission report into water trading in the Murray Darling Basin, with a number of its recommendations now being assessed by the federal government's water market reform principal advisor Daryl Quinlivan.
Under the microscope is a way to change current arrangements where the fastest on the button when trading is open can dominate transactions.
ABARES senior economist Neal Hughes said a system that did not favour those with better technology was critical.
"It is likely we'll see more demand for water than is available so we need to ration that demand with pro rata access to trade, ballots and auctions which will help to ensure things are fairer," Mr Hughes said.
He said many of the issues in the water market were like those encountered in the electricity sector.
"There is that disconnect between the market and physical delivery."
"The problem is that trade demand will outweigh capacity to deliver for some time and we have to figure out the best solutions to this.
"It is safe to say we're never going back to trading as much water as you want, the best thing to do is to put the responsibility for decision making in the hands someone who is accountable regarding environmental and hydrology needs as well as that of the market."
Mihir Gupta, also a senior economist at ABARES, said there were benefits in opening up IVTs.
"Many participants, both buyers and sellers, have benefitted and it is now a crucial tool, however structural changes have pushed the markets to their limits," Mr Gupta said.
"Water right holders in the Goulburn system have been able to get a better price selling into the Murray system, but equally as the ACCC identified it is currently those fastest to put in their bids that get the benefits, so moving to trades occurring on a fixed schedule could help."
Water out of the Goulburn system has traditionally traded at around $20-30 a megalitre, or around 30pc, lower than the Murray.
More broadly, Mr Gupta said the irrigation sector would have to position itself to do more with less water.
He said the industry was facing a tough period with increased demand, especially from horticulture and tree crop producers, which have a fixed demand for water each year, combining with reduced supply through climate change and seasonal droughts.
Information was also an area Mr Gupta said could improve.
"There is not much information around about the levels of demand."
Joe Banks, Victorian government water markets and grid acting director, said the Victorian government was looking to find an optimal level of trade between the valleys.
"We need to see how much is environmentally sustainable and how much the trade can handle," Mr Banks said.
Irrigator Rachel Kelly said irrigated agriculture was looking for a more equitable system in terms of access to traded water.
"The IVT system is not perfect, we'd love better arrangements, the feedback is that a handful have better opportunities to access water sales than the general rice grower," Ms Kelly said.
"We don't have a problem with using water brokers per se, it is what you have to do generally when trading on the stock market but the system needs to be reformed so it does not disadvantage those that find it harder to access."
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