The high prices currently being paid for temporary water are pushing some irrigators' production costs so high they barely break even. Murray Darling Basin water shortages in the past two years and a doubling in temporary market values to current highs of $800 to $1100 a megalitre were driving orchard, vineyard and grain industries such as rice and cotton beyond profitability, says National Australia Bank's agribusiness economist, Phin Ziebell.
Even more pressing was the problem for permanent horticulture sector croppers, caught by the intense cost-price squeeze. They did not have options to stop growing crops for a season when water values skyrocketed - they needed supplies to keep established vineyard and orchard plantings alive.
"Temporary water prices in the Victorian Murray irrigation region (from the Barmah Choke to the South Australian border) increased 138pc in the past year, to $950 a megalitre," Mr Ziebell said.
"Upstream of the Barmah Choke, temporary water prices increased 55pc in the same period. Our modelling shows that for a Sunraysia temporary-water reliant wine grape producer, the $550/Ml uplift in price equates to roughly $180/tonne of grapes. That's nearly 40pc of the per-tonne average value of warm climate wine grapes."
Citrus irrigation costs
Despite recent bullish export citrus demand, Citrus Australia chairman, Ben Cant, confirmed SA Riverland producers would currently expect to receive $600 to $800/t, yet with current temporary water prices above $800Ml, many irrigators may be paying $500/t to $650/t, or more, in growing costs.