Weekly Water Update - 26th April 2021
Slightly different approach to this week’s update – I will only be speaking to what I see are two major points of consideration in water markets presently, Carryover and Menindee Lakes
Firstly on Carryover, see below table which outlines current allocation account balances and how the connected system is tracking towards 30 June:
A few assumptions I have applied to these numbers to observe:
The 30GL Murrumbidgee IVT order for May is not accounted for as this is just moving water from Murrumbidgee to Murray system – either way it reduces one account and credits the other – it is possible that all trading zones will be “open” to each other sometime in May as the Murrumbidgee River closes for trade on 31st May
I have allowed a further 200GL usage for VIC Murray this season purely based on where usage is at today compared to prior years – so current balance today is 940GL less an assumed 200GL usage
Goulburn usage has been materially lower this season compared to pre-drought levels mostly because of the altered IVT deliveries that were coming out of this system during the drought compared to current operations
Each area of the connected system carries over its complete allocation available against General Security (NSW) or Low Reliability (VIC) to deliver surplus/deficit values
Key inferences to highlight:
VIC has a significant amount of water still to deal with prior to 30 June, even allowing for a further 250GL of slack usage there is still ~600GL of allocation that will have two options to manage:
A) move onto NSW General Security licences where there is a perceived capacity of 240GL today OR
B) carry over on High reliability accounts
It will be a combination of the above of course which we are seeing in the market with the balance of the Barmah choke at +11GL this morning
The Vic Resource manager has highlighted the increased spill risk for Entitlement holders in both the Murray and Goulburn rivers for the next season – on projected numbers to 30 June it is possible that there will be up to 100GL more allocation carried on VIC Murray High Reliability accounts than in FY17 when the Hume physically spilled
In FY17 the Goulburn Valley didn’t carry over any allocation against its High Reliability entitlements – this year it could possibly be holding between 150-200GL against High Reliability entitlements
The Murrumbidgee is effectively full which is not anything new to the market and has been forecast for quite sometime
The big questions are how much allocation is willing to move upstream above the choke and park onto a NSW G/S entitlement knowing that only 25GL is the best opportunity to move it back below the choke on the 1st July? AND
At current pricing of $60-$80, is allocation rightly priced to have a run at parking on High Reliability in VIC? If the season turns dry then it’s an outright winner, however an average to slightly better than average spring creates an interesting dilemma if that water is quarantined for an extended period, or even written-off, the opportunity cost could be up to ~$200/ML in replacing this water
The Menindee factor and coming back into MDBA control, based on flow rates currently recorded Vic could pick up ~500-550GL in resource for distribution in the coming 4-6 weeks and NSW could have 700-750GL at its disposal (including its 480GL resource when returned to state based control). The significance of this resource is far greater that the volumes of water it will receive in the coming 4-6 weeks as this will have major ramifications for next season’s deliveries for both the Murrumbidgee and Goulburn systems, and overall contingencies allowed for when budgeting to run a river for the year. Theoretically half of South Australia’s required reserves and entitlements could be met from Menindee alone thus helping Hume/Dartmouth supply materially – we will understand more on this as flows to Menindee build and river operators start to release indicative guidance on opening allocations and river operations for next season
When considering the volume of allocation water across the system and the converging allocation pricing – is $60-$80 today (location dependent) presenting good selling assuming that allocation could be between $100-$120/ML in July to acquire? The answer will vary across the connected valleys however it presents a similar question for all allocation holders. To carryover or sell today and take the profit? At $60 I don’t foresee much Murrumbidgee allocation being purchased for carryover as the risk still outweighs benefits at these levels. At $80 in the Murray, on face value it appears a good price to sell in view the volume of allocation however the weighted view of the seasonal conditions for spring and how will that impact carryover on High Reliability accounts is a major unknown at this point in time
On that point of weather outlooks, the later parts of May are showing for improved rainfall potential locally and over catchment areas in general. The BOM is calling a 75% chance of exceedance of 100-200mm over the three catchments and slightly more for Goulburn markets for the May-Jul period
Allocation markets:
Murray River - $75-$80
Goulburn – $75-$80
Murrumbidgee - $60
Top Opportunities – All Enquiries Welcome
Permanent markets buyer interest of note in the following zones:
Murrumbidgee High Security – offers at $7,100 dry
Murrumbidgee General Security – offering $2,250 dry
Murray (above choke) General Security – offering $1,625 dry
300ML Lower Murrumbidgee Zone 2 Groundwater DRY – $4,000
800ML Lower Murrumbidgee Zone 3 Groundwater DRY – $3,600
Murrumbidgee River Temporary Supplementary (current season) – offering $10/ML – up to 1,000ML
Murrumbidgee Irrigation Forward Supplementary (delivery 1st July) – offering $45/ML – 1,000ML
Murrumbidgee Carryover (Holders Risk) – offers $100/ML – call to discuss if you would like to sell your carryover space
As always, please call to discuss any enquiries or requirements you have.
Regards,
Grant Volz
Director – Terra Ag Rural Agencies
Unit 30, 16-24 Whybrow St, Griffith NSW 2680
M: 0418 916 031
F: 02 6964 6095
