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Key Water Blog

AWBA in discussions with state water register on transparency

Stock and Land article

Australia’s peak water broking body has joined calls for greater transparency in southern Murray-Darling Basin trades.

Australian Water Brokers Association (AWBA) president Ben Williams says clarity would be relatively easy to achieve.

“We think there can be some relatively simple tweaks to the way registers report and collate data around entitlement and allocation trading,” Mr Williams said.

“That would provide further and more precise information to the market-place.

“The AWBA has been in discussions with the State Water Registers for a number of years, with a view to improving the information that is reported on the water registers.”

Mr Williams said AWBA believed the entitlement market could benefit from transaction coding, to provide observers with information about what it called “value inconsistencies”.

The entitlement market could benefit from coding to provide observers with information on in, and out, of seasonal allocations.

“Similarly the allocation market would benefit from transaction coding to delineate the various products that exist in the market and provide more clarity around price divergence,” he said.

Such coding could cover forward allocations, entitlement lease delivery (currently recorded as a $0 trade) and mandatory price reporting of the spot market.

“South Australia is looking to implement these changes in their new water register, while Victoria’s Department of Environment, Water, Land and Planning have taken the advice on notice,” Mr Williams said

“The commonwealth Department of Agriculture and Water Resources are also supportive of the changes.”

Mr Williams said AWBA had concerns with the suspicion around $0 trades.

“But we would stipulate that $0 values, for some trades, are completely accurate and entirely necessary for market transparency,” he said.

He said there were several reasons for $0 trades.

They could cover moving licences, or accounts, owned by related entities, the delivery of carryover to and from a holding licence and the delivery of allocation, associated with an entitlement purchase.

“These reasons could be coded to indicate the reason for the $0 value and provide the market with better information about $0 trades,” he said.

AWBA also rejected claims by the Almond Board of Australia of unconscionable conduct by water brokers.

“It’s unhelpful because the real issue gets potentially pushed to the side, on spurious claims, that are baseless,” Mr Williams said.

They are unhelpful because the real issue gets potentially pushed to the side, on spurious claims, that are baseless.– Ben Williams, Australian Water Brokers Association

“It’s fairly clear, from the discussion that’s been taking place, certain members of the Almond Board and growers, have issues with some of the larger investment groups, and the way they operate in the market.”

But he said it was not the AWBA’s job to run a “marketing campaign” for investment firms, such as Duxton.

“They have bought entitlements, over a number of years, from willing sellers,” he said.

“Those sellers, in some instances, have been exiting agriculture and using the sale proceeds as a retirement fund, or they are funding further growth, and need the capital to do that.”

He said prices were high because supply was low, due to the ongoing drought.

“As all irrigators are aware, Murray-Darling Basin Authority active storage is down to 47 per cent, and allocations granted to most entitlements are currently restricted, 30pc less in total, than the same time last year,” he said.

“Demand for allocation in the Murray is much higher than in the past, primarily due to the massive expansion of almonds over recent years, in particular, below the Barmah Choke.”

He said much of the new greenfield development had been done by “corporates, many of whom own little if any permanent water entitlement”.

The additional demand, created on the temporary allocation market, was increasing each year.

“Since the Millennium Drought, there has been significant structural change in the water market, not the least of which has been the afore-mentioned expansion of almonds and other horticulture,” he said.

“Environmental water holders now account for approximately 29pc of entitlement in the Southern Murray Darling Basin.

“These two factors alone have had a material effect on reducing the elasticity of temporary water markets.”

Meanwhile, Opposition Water spokeswoman Steph Ryan has called for urgent action to create a single, transparent trading platform for the southern basin.

Ms Ryan said irrigators had raised serious concerns they were going broke, because they couldn’t compete with speculators and investors, sending water prices skyrocketing.

“A transparent trading platform would prevent anti-competitive conduct and distortion of the water market,” she said.

Water Minister Lisa Neville had said there was “no real evidence” that competition from speculators and traders was pushing up water prices

“But in 2017/18, 21pc of Victorian allocation was purchased by accounts not linked to land or irrigation, compared with 5pc in 2014/15,” Ms Ryan said.

She said the state government must take greater action to place stronger obligations on water traders to ensure transactions were conducted fairly and with transparency.

“Our communities are hurting,” she said.

“Enough is enough, Spring Street and Canberra need to start listening to our irrigators.”

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