This morning WaterNSW advised that the IVT balance for temporary/allocation transfer or trading between the Murrumbidgee and Murray Valleys was at 1.2GL. Later this afternoon at 4:30pm they updated that the trade from the Murray to Murrumbidgee is now closed.
So… what does this mean?
The IVT (Inter-Valley Transfer) limits the amount of water that can be traded between valleys. It is based on the amount of water that can be physically held and delivered by the storages and system.
The limit between the Murrumbidgee and Murray Valleys is set at 100GL (100,00ML).
At the start of this water year, the IVT was at 89GL, with previous interest being in moving water OUT of the Murrumbidgee and into the Murray where temporary water prices had been higher.
For a number of reasons (lower total availability, higher cotton planting intentions) the situation has reversed this year, with buyers, demand and better prices available in the Murrumbidgee. This has seen a large volume of water move from the Murray system to the Murrumbidgee since 1st July.
This movement can be traced through the Water NSW register, but the summary is basically as follows: IVT balance as at 1 July 2017 89GL
Volume traded/transferred Murrumbidgee to Murray 61GL
Volume traded/transferred Murray to Murrumbidgee 149GL
IVT balance today 20 October 2017 0.6GL
You will note that “trades” and “transfers” are mentioned.
Some transfers are irrigators in the Murrumbidgee system who also own entitlement in the Murray system (NSW Murray, Vic Murray/Goulburn, SA Murray) bringing the allocation from these licences back up into the Murrumbidgee for use.
Other transfers are Government water being moved between licences in the various valleys. This includes water from returned entitlement as well as operational transfers such as conveyance water.
Then there are the trades that show up at different prices to the temp market at that time – these are usually forward water trades arranged the previous season and then being delivered. At this stage, there is no actual way of identifying these based on the transfer applications submitted to the relevant water authorities. The ability to do so has been raised recently with some of the authorities and is being considered.
There are also some transfers that are potentially temp sellers moving water ahead of the impending closure, in hope of higher prices in that market once the IVT is shut. In doing so, the rate at which the IVT drops has increased.
The other listed trades are simply what happens in most markets – a commodity moving to the area of highest return. So much water has been moved, that the ability to do so is almost finished.
So… what happens now?
That’s the $64,000 (or 89,000ML) question.
In theory, higher demand and reduced supply in the Murrumbidgee Valley would mean the market would be forced upward. However, there are many other factors to consider, such as – Is the demand still there or have summer croppers secured their requirements? Will rice growers sell their allocation instead of growing rice? Is the amount of water transferred up into the Murrumbidgee greater than the demand? All of these could work against an expected higher temp price.
Meanwhile in the Murray Valley, the Murrumbidgee buyers have been removed from the market. What will the demand in the Murray be? There is certainly still good supply. What will the price be there? Have the permanent plantation (e.g. grapes, citrus, almonds) producers been buying any water yet or waiting to see what will happen if/when the IVT closed?
If demand in the Murrumbidgee has been satisfied, will the price drop low enough that buyers in the Murray Valley start purchasing water from the Murrumbidgee and move the IVT back the other way? Or will the price in the Murray stay above the price in the Murrumbidgee?
So… Where to from here?
To be honest, your guess is as good as anyone’s! Having said that, don’t hesitate to get in touch to discuss this further. Call Anthony on 0418 564 940 or send an email to email@example.com with your questions or comments.