October 13, 2008

Australian Farmers Trade Water

By Tanalee Smith The Associated Press

SYDNEY, Australia - For farmer Malcolm Holm, water now is just like a new shovel or tractor - he has to buy it.

The amount of water he is allowed to take from nearby Murrumbidgee River has dwindled to nothing for the past three years because of Australia's crippling drought. And so, except for rain he can catch and store himself, he needs to buy water for his 1,000 acres at Finley in New South Wales state, where he grows crops to feed his 600 dairy cows.

"It's no different to buying a ton of grain or a ton of fertilizer," Holm said. "It's just another commodity."

In the world's driest inhabited continent, there is simply not enough water to go around, and households, cities, industries and agriculture all demand their share from stressed reservoirs and rivers. So Australia's irrigation planting sector relies on a unique trading system to make the most of every drop.

What began as a localized trade within states is now an active national market that shares water along hundreds of miles of river systems used by thousands of farmers. And with the drought, the trading of water is picking up pace.

"Trading activity is certainly strengthening over previous years," said Mark Siebentritt, operations manager of Waterfind, the nation's largest water broker. Water is traded mostly through independent brokers who bring sellers and buyers together and who know the myriad rules in the heavily regulated market. "During drought we're seeing a lot of water moving around."

Waterfind says more than 28 billion gallons of water are traded each year along the Murray-Darling river system. Waterfind turned over $893 million worth of water in 2006-07, up 20 percent over the previous year as prices rose and some license holders realized their allocation was worth more to them as cash.

In Australia, water is managed by state governments through entitlements awarded to urban and rural areas and industries. Sixty percent goes to agriculture.

An entitlement, or license, gives the owner an ongoing right to a share of water from a river system. The amount can fluctuate at any time depending on how much water is in the country's rivers and storage areas.

But years of drought have left rivers and storage basins at low levels and water evaporating away in the heat. Allocations the past few years have been low to nonexistent - Holm and others in the Riverina got nothing this year or the two before.

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