Fact sheet: Survey of water entitlement sellers
Department of Sustainability, Environment, Water, Population and Communities, June 2012
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Restoring the Balance in the Murray-Darling Basin (RtB) is Australia's largest ever market based environmental water recovery program. Up until April 2012, the Australian Government had committed to purchase about $2.1 billion worth of water entitlements from Basin irrigators. On average, these entitlements should deliver around 990 GL of water each year.
In December 2011 the Department engaged consultants to survey irrigators who have sold water entitlements to the Commonwealth under the RtB program. A total of 589 Basin irrigators were randomly surveyed by phone in early 2012.
Of the 589 irrigators surveyed, 520 irrigators had successfully sold water to the RtB program and 69 had applied to sell but the trade had been delayed by the Victorian limit on out-of-district trades or the trade had been withdrawn. Of the 520 irrigators who had sold water to the Commonwealth, 312 (60 per cent) had sold part of a surface water entitlement to the Commonwealth and were still farming, 158 (30 per cent) had sold all of their water to the Commonwealth and had exited farming, and 50 (10 per cent) had sold all of one surface water entitlement to the Commonwealth and were still farming.
Irrigators surveyed had participated in the RtB program tenders between 2008-09 and late 2011. Irrigators who took part in the 2007-08 tender were not surveyed because their application documentation did not include a question asking them to participate in follow up assessments of the RtB program.
The irrigators surveyed were representative of irrigators who have sold water to the RtB program by State, region and year of participation.
This fact sheet summarises the results of the irrigator survey.
How many irrigators have sold water to the Commonwealth?
Since the RtB program began in 2007 to the end of 2011, around 3,150 irrigators had successfully sold water to the Commonwealth, and many more irrigators have applied to sell water.
Do irrigators sell all of their water when they sell entitlements to the Commonwealth?
No. Around 60 per cent of irrigators surveyed sold some of the water from a surface water entitlement they owned. On average, these irrigators sold around half of the water attached to their surface water entitlement.
Many of the 30 per cent of irrigators who sold their whole surface water entitlement to the Commonwealth owned other types of water entitlement. This means while these irrigators have sold all of the water from one entitlement, many have not sold their entire water holding.
Has selling the water been a positive decision for individual irrigators?
Generally yes. Almost 80 per cent of the irrigators surveyed said that selling water to the Commonwealth had been a positive decision for them, including around 30 per cent who said that selling water had been a very positive decision. Around 13 per cent of irrigators said their RtB water sale had not been a good decision for them.
Why do irrigators sell their water entitlements?
Around 60 per cent of irrigators surveyed said they did so to generate cashflow. Most of these irrigators used this cashflow to retire debt, supplement farm income, or invest on-farm.
What are the consequences of RtB sales for farm production?
Many irrigators who have sold water to the Commonwealth and have remained in farming said selling water has not impacted on their farm production.
Around 50 per cent of the irrigators who had sold part of their water entitlements and remained in farming said that the water sale had not impacted on farm production. Around 30 per cent of the irrigators who sold all of their water entitlements and continued farming said that their farm production had not been affected.
Many of these irrigators appear to have been able to maintain production because they had sold surplus water, purchased water allocations, increased on-farm irrigation efficiency, or used other water entitlements they own.
Do farms lie fallow when water is sold and farmers exit farming?
The survey results show that in most cases farms do not lie fallow when an irrigator sells all of their water entitlement and exits farming.
Of the 158 irrigators who had sold their water entitlements and exited farming, 67 knew how their farm was currently being utilised. Of these 67 irrigators, 70 per cent said their farm was now being used by another farmer for irrigated farming. Around 25 per cent said their farm was now lying fallow, including cases where the farmer had retired and now lives on the farm.
Do irrigators dispose of their delivery rights when they sell water entitlements?
Not often. More than 90 per cent of all irrigators who operated farms in irrigation systems and sold water told us that they had kept their water delivery right following their water sale to the Commonwealth. This means these irrigators are continuing to pay for the upkeep of irrigation water delivery infrastructure.
Do irrigators leave the region after they have sold water to the Commonwealth?
At most, 10 per cent of irrigators who have sold water to the Commonwealth over the past four years may have left the region. The real percentage is likely to be much less than this.
The survey results show that most irrigators who sell all of their water and exit farming do not leave their region. Rather, most of these irrigators have found other employment in their region (51 per cent of 158 irrigators surveyed who had exited farming), have retired in their region, either on their farm or in their local community (35 per cent of the 158 irrigators surveyed who had exited farming), or are doing other things in the region. Around 3 per cent of irrigators who had exited farming said that they were currently unemployed.
Does money leave the region after they have sold water to the Commonwealth?
In total, less than 5 per cent of survey respondents said that most of the money they had received from Commonwealth water sales had been spent outside their region. More than 35 per cent of sellers said they had used the proceeds of their water sales to invest on their farm or directly in their region.
A further 55 per cent of irrigators surveyed said they had used the proceeds of their water sales to retire farm debt. Because debt retirement results in farmers owning more of their farm assets, this means much of the proceeds of water sales are actually remaining in their region as increased farm equity.
What would irrigators like changed?
Almost half of the irrigators surveyed said they did not agree with the idea of the Commonwealth recovering water from irrigators for environmental watering. Even though most think their water sale did not have any negative impacts on their local community, many are apprehensive about how RtB may affect irrigation communities in the longer run.
More than 50 per cent of the irrigators surveyed said they wanted general tenders to resume in the southern Basin, and around half also said that they would consider selling water to the Commonwealth again in the future.
Many irrigators would like the Commonwealth to reduce the transaction times for their water sales. They also want the Commonwealth to be more transparent about where, when, and how the Commonwealth plans to recover water in the future. Reducing this uncertainty will allow irrigators and irrigation communities to better plan their water entitlement sales, and integrate these sales into farm and community plans.
More information
For more information on the Survey of water entitlement sellers, please visit Restoring the Balance in the Murray-Darling Basin program.The information contained in this factsheet is in accordance with the scope of services described in the contract or agreement between Marsden Jacob Associated Pty Ltd and DSEWPaC.
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