ROADNIGHT MUSING – SEPTEMBER 2025
Ricardo Water Price Outlook Discussion – August 2025
Andrew Colliver, Managing Director Investments of Roadnight Ag recently sat down with Ben Williams to discuss the outlook for water prices for the coming season.
Ricardo Associate Director, Benjamin Williams, is an experienced advisor with more than two decades of experience in water markets, irrigated agriculture, and industry. He is recognised as a leading expert in Australian water markets and provides a unique perspective on complex water market issues and strategies to support critical water management decisions. As Ricardo’s Water Markets Advisory Lead, Ben works with water market participants to develop strategies that support investment decision-making based on the best available evidence and robust analysis.
Ben has supported public and private sector clients with policy review and development, prioritising and planning investments, and commercial reviews in the water sector.
Q: What allocation are you expecting for the coming season, and how do you expect it to impact water prices in the southern Murray-Darling Basin?
A: Opening allocations (1 Jul 2025) were lower than last year for Vic HRWS and NSW GS (e.g., Vic Goulburn HRWS 31%, Vic Murray HRWS 39%, NSW Murray GS 1%, NSW Murrumbidgee GS 4%; SA Murray HS opened 100% again). This contributed to less water available at the start of 2025-26 (≈1,513 GL; down 44% y/y) and an estimated ≈4,664 GL total available to consumptive users before peak season under an average inflows scenario.
Given BOM’s Aug–Oct outlook skewing wetter—but with the key caveat that headwater inflows need to materialise—Ricardo expects allocation prices to be steady to slightly softer from early-Aug levels (~$190–$270/ML), but this hinges on storages capturing new inflows. If inflows underperform, prices stay elevated.
Q: What are the main factors currently influencing water prices in the Basin?
A: The main factor influencing water prices in the southern MDB at the moment is rainfall – both on farm but more importantly over the headwater storages. The exceptionally dry conditions experienced in 2024-25, combined with a large annual cropping program, resulted in the second-largest in-season storage drawdown in 25 years (5,023 GL). As a result, storages opened the year at their lowest level since 2018/19. We also had lower levels of carryover into 2025-26 (~2,100 GL vs ~3,200 GL peak), and reduced opening allocations, which has reduced overall water availability.
In addition to this, July was still very dry, with the exception of the final week.
Q: Do you expect less demand from annual crops like wheat and rice if water prices stay above historic averages, an example being Murrumbidgee High Security staying at or exceeding $300/ML?
A: In short, yes. Commodity prices are not especially exciting, particularly with allocation prices remaining above $250 /ML.
Benjamin Williams – Ricardo Associate Director
Q: With many crops like almonds still maturing, do you expect demand for permanent plantings to increase, and will this be offset by a reduction in wine grape areas?
A: Unlike cotton and rice prices, almond prices have improved significantly over the past 6-9 months and this is likely to restore confidence in the sector. New plantings have slowed over the past 5 years, due in part to the moratorium in Northern Victoria, but some developments have continued such as Koompartu Farms in South Australia. Whilst we do expect a reduction in the area of wine grapes, some of this will be repurposed to alternative production. We have seen quite a few of these conversions in the Riverina, with winegrape properties converted to nut crops or citrus.
Q: Recent dry conditions have impacted temporary pricing, but permanent water entitlements have not seen a similar increase. Why is this the case?
A: Broader economic headwinds, in particular higher interest rates and flagging commodity prices through late 2022 and early 2023 saw a reduction in demand for permanent entitlements from March 2023. In fact entitlement prices, as reflected in the Ricardo Entitlement Index, fell 4% across the 2022-23 water year and nearly 8% across the 2023-24 water year.
That trend turned around in 2024-25 however with the Commonwealth entering the market to recover water against Basin Plan targets. At the same time there has been some improvement in commodity pricing and a more positive outlook for interest rates into the future. Over the 2024-25 water year the REI actually rose by 5.7%.
Q: How are inter-valley or interstate water trades influencing prices and availability at the local level?
A: The binding nature of IVT restrictions influences price differentials between zones through the year. There is a shortage of water in the Lower Murray, due to the well document growth in permanent horticulture in that area, much of which is not underpinned by owned entitlements. As a result, intervalley trade is an important source of water for producers in this area. The same can also be true of the Murrumbidgee IVT, however in years where the demand from annual crops is high, the balance of trade can result in prices in the Murrumbidgee being higher than those of the Murray.
Q: How do you foresee the balance of water supply and demand evolving in the Basin over the next few years?
A: In the short term we expect to see much the same as what we have seen recently. Allocation markets have become more reactive to changes in water supply, especially when conditions turn dry. Demand from permanent horticulture is likely to grow, however at a slower rate than we have seen over the past decade. Demand from annual crops will swing with commodity prices and water availability.
Q: How significant a role do water buybacks play in shaping water availability and pricing, and what are the implications for both the environment and farmers?
A: The recovery of the full 450 GL target, distributed proportionately on entitlement on issue in the southern MDB, would result in an approximately 10% reduction in the consumptive pool. Over the longer term, the reduction in the volume of water held in the consumptive pool is likely to see higher allocation prices on average. This effect will be most noticeable in dry years and especially in the lower Murray.
Q: Groundwater entitlements have seen a resurgence in the market. Can you provide figures on this trend, and what does this mean for farmers looking for an alternative to surface water entitlements?
A: Groundwater markets saw increased activity in 2024‑25, the first annual increase since 2019-20. Drier conditions in 2024-25 led irrigators to look to groundwater to mitigate water security risks. Groundwater offers a more secure water supply than surface water but usually has higher pumping costs.
Eleven priced entitlement trades in the southern MDB totalling 3.3 GL were recorded in major groundwater zones (Lower Lachlan, Lower Murrumbidgee and Lower Murray), up from seven trades (1.8 GL) in 2023-24. This is still well below the peak of 7.5 GL of priced trades in 2021‑22.
Similarly, the volume traded or transferred (including $0 trades) in 2024-25 was 4.5 GL, up from 2.7 GL in 2023‑24, but below the peak of 11.6 GL in 2019‑20.
Q: What key advice would you offer farmers navigating the current and future water pricing landscape?
A: Know your margins, this will dictate how much you can pay for water. Based on this develop a water strategy that suits your risk appetite and that is adaptable to a changing climate.
If you seek further information, we encourage you to refer to the Ricardo Water Markets Report released in August 2025.
Click here for the Ricardo Water Markets Report
Australian water management has undergone a significant period of reform over the past three decades. The establishment of water markets has been a key component of this reform story. Water markets are now an established part of agricultural, urban and environmental water policy, management and investment in Australia. The Ricardo Water Markets Report provides an overview of current water market activity in the southern Murray–Darling Basin, compares market outcomes with recent years and comments on the future outlook. Ricardo prepares this free publication as part of our goal to improve the transparency of Australian water market information for all market participants.
