As global economies slow and markets struggle, the water used to grow Australia’s fruits and vegetables may be the next target for investors looking to make a profit.
A consortium has raised $27 million to buy irrigation water in the Murray-Darling Basin, and says it has plans to buy much more.
NIKOLAI BEILHARZ: For most people in Australia, turning on the tap is as hard as it gets to find water. Most of us use it for drinking, cleaning or watering the plants.
But increasingly, water’s next frontier could be making money.
RICH GILMORE: The broader Australian community, including the agricultural community, have multiple aspirations. We know that they care about nature and the environment but they also care about child food security, agricultural security; those sort of things.
NIKOLAI BEILHARZ: That’s Rich Gilmore, country director for Nature Conservancy Australia, which is partially coordinating the Murray-Darling Basin balanced water fund. He says investors are pouring millions into buying up irrigation water used on farms as demand for clean and green food from Australia grows.
RICH GILMORE: In the first instance, it’s been high-net-worth investors who really see the value in achieving those balanced outcomes. So they’ve been sort of trust and foundations, individual investors who care about agriculture and who care about the environment, and then as we get to scale we might look at institutional investors.
NIKOLAI BEILHARZ: The Murray-Darling Basin balanced water fund has already raised $27 million and is aiming for a total of $100 million worth of investment. It says it wants to buy 40 gigalitres of water, equal to about 10 per cent of the capacity of Sydney Harbour, from irrigators right across the Murray-Darling Basin. Under the plan, permanent water allocations will be purchased from irrigators and then leased back to them on a long-term basis of five or 10 years.
It has lofty aims: to return a profit to investors, to help farmers by giving them new access to capital and by providing environmental water to wetlands as well.
Rich Gilmore says he does think that’s all achievable.
RICH GILMORE: Certainly investors will expect a return from their investment – a commercial return for their investment. But also really importantly are the natural outcomes, so environmental restoration work that we’ll be able to do, but also the water security outcomes for irrigators.
So the primary investment tool in the fund is long-term leases, which provide water security back to irrigators as well as price security back to those irrigators.
NIKOLAI BEILHARZ: The National Irrigators Council, which represent farmers, says it doesn’t have any significant concerns about the move.
CEO Tom Chesson rejects the idea that buyers and holders of water at this scale can distort the supply and demand enough to drive up irrigation water prices for farmers.
TOM CHESSON: Can they manipulate the market? You would have to be hailing a lot more water than 40 gigs in the southern connected system of the Murray-Darling Basin to be manipulating the market. But look, I think we’re still going to see agriculture in southern region. I think if you don’t want to sell you water, you do not have to sell your water to anyone. That is your right.
MARK COLVIN: Rich Gilmore, country director for Nature Conservancy Australia, speaking with Nikolai Beilharz.