Social and economic impacts of the Basin Plan in Victoria February 2017

4.4Observed ex-post behaviour of Victorians who participated in the buyback

To support the production of this report, DELWP staff analysed the water holding and water use records for a sample (11% of the total population) of those irrigators who sold water entitlement to the Commonwealth, but continued to irrigate.

Because water use varies from year to year, their pre-sale water availability and water use was compared with their water availability and use in the 2015/16 year – which was judged to be the first year of use not masked by the extraordinarily high volumes of carryover made available in the La Nina years (DELWP, 2016a). This separated the sample into three groups depending on the year they sold to the Commonwealth: 2008/09, 2009/10 or 2010/11.

The sample was stratified according to the size of their original holdings and this was compared to a similar stratification of the total population. The 2008/09 sample represented the population well, the later years had a slight overrepresentation of small volume sales.

Before sale to the Commonwealth, the irrigators in the sample were reliant on the allocations that accrued to their entitlement. Many also traded water and were net purchasers of water allocations (66-69% for 2008/09 and 2009/10 sellers, and 29% for 2010/11 sellers). After the sale of entitlement to the Commonwealth, many changes to water sourcing decisions occurred:

• 
  Many irrigators had sold all of their original entitlement (only 61-74% of the sample of irrigators from each year of selling still received allocations to their pre-buyback entitlement)
  
• 
  Many had purchased new entitlements (37-49% of the sample of irrigators from each year of selling received allocations to new entitlements purchased)
  
• 
  The proportion of net purchasers of water allocations increased:
  

• 
  from 69% to 77% for 2008/09 sellers of entitlement under buyback
  
• 
  from 66% to 78% for 2009/10 sellers of entitlement under buyback
  
• 
  from 29% to 63% for 2010/11 sellers of entitlement under buyback
  
• 
  The reliance on water allocation purchases increased:
  

• 
  from 11% of water available to 52% across the sample of 2008/09 sellers
  
• 
  from 12% of water available to 39% across the sample of 2009/10 sellers
  
• 
  from -3% of water available to 26% across the sample of 2010/11 sellers
  

The key results are summarised in the following charts.

Figure : Volumetric water sourcing and use before and after selling entitlements to the Commonwealth (for sample of sellers who participated in 2009/10 buyback)

Source: pers. comm. DELWP 2016.

Figure : Percentage water sourcing and use before and after selling entitlements to the Commonwealth (for sample of sellers who participated in 2009/10 buyback)

Source: pers. comm. DELWP 2016.

Figure : Volumetric water sourcing and use before and after selling entitlements to the Commonwealth (for sample of sellers who participated in 2010/11 buyback)

Source: pers. comm. DELWP 2016.

Figure : Percentage water sourcing and use before and after selling entitlements to the Commonwealth (for sample of sellers who participated in 2010/11 buyback)

Source: pers. comm. DELWP 2016.

Figure : Volumetric water sourcing and use before and after selling entitlements to the Commonwealth (for sample of sellers who participated in 2011/12 buyback)

Source: pers. comm. DELWP 2016.

Figure : Percentage water sourcing and use before and after selling entitlements to the Commonwealth (for sample of sellers who participated in 2011/12 buyback)

Source: pers. comm. DELWP 2016.

4.5Corroborating evidence from ABARES Farm Surveys

Results from ABARES Farm Surveys corroborate the above analysis with respect to dairy farms. ABARES (2015) found:

In 2012–13 and 2013–14 the proportion of dairy farmers trading water increased significantly as a result of permanent water access entitlement sales and a change in business and risk management strategies. Many farmers had sold water access entitlements and, subject to price, opted to purchase temporary water as required

… Some dairy farmers at the workshop indicated this was because of changes in business strategy to source water from temporary markets rather than holding permanent entitlements

… Some dairy farms now have no or few permanent water entitlements and completely rely on the temporary water market.

In the years after the bulk of buyback had occurred, the majority of dairy farms surveyed by ABARES were net buyers in the allocation market. In 2012/13 and 2013/14, around 60% of farms were net buyers.

Figure Percentage of dairy farms by allocation water trading activity, Murray–Darling Basin, 2006–07 to 2013–14

Note: Net buyers/sellers are farms that bought/sold more water than they sold/bought. Survey estimates for water trading are not available for 2014–15.
Source: ABARES 2015.

This is in contrast to horticultural farms in the MDB, many of which were net buyers of water allocations during the drought, but have not been observed to be as active in water allocation purchases in the years since the bulk of buyback occurred. ABARES (2016) presents the proportions of horticultural farms that were net seller of citrus and pome and stone fruits, however does not report similar information on other types of horticultural farms that were net sellers of grapes or nuts.

Figure Percentage of citrus farms by allocation water trade group, Murray–Darling Basin, 2006–07 to 2013–14

Note: Net buyers/sellers are farms that bought/sold more water than they sold/bought.

Source: ABARES 2016

Figure Percentage of pome and stone fruit farms by allocation water trade group, Murray–Darling Basin, 2006–07 to 2013–14

Note: Net buyers/sellers are farms that bought/sold more water than they sold/bought.

Source: ABARES 2016