murrumbigee water

Since time immemorial, water has sustained life and fuelled commerce and trade. Economic success often depends on it. Therefore, it is unsurprising that in drought-ravaged Australia, water management policy is highly political and often acrimonious. It’s been that way since the beginning of Federation in 1901, when conflict over control and sharing of the Murray River was one of the most contentious issues of the day.

As Australia’s oldest irrigation trust, Renmark Irrigation Trust has been part of a constantly changing landscape. Established in 1887 as an irrigation settlement, it supplies water to farmers in the food bowl of Renmark, a rural town on the bank of the Murray River in South Australia’s Riverland region, 258km northeast of Adelaide.

The trust’s aim is to deliver water efficiently and affordably to its 600-plus members, who comprise mostly small and medium-sized holdings. These family-run farms grow a variety of crops, including wine grapes, pistachios, almonds, stone fruit and citrus.

“Since the millennium drought began in the mid-1990s [1996-2010] there have been enormous changes in the way water is managed,” says Humphrey Howie, presiding member of the Renmark Irrigation Trust.

Perhaps the biggest change during this period has been that water has become a commodity with a marketable value. Prior to 2007, it was simply considered part of the land, but commoditisation has attracted profit-seeking investors with no stake in the industry. As a result, the cost of water has shot up from $47 per megalitre in 2016, to as much as $1000 per megalitre today. In some cases, this cost has skyrocketed even further.

“This has had a huge impact on irrigators, who need that water to grow their crops,” says Howie. “Water prices are volatile. It’s a bit like a sharemarket, but with a lot more interference.”

The trust is limited in the revenue it can raise, explains Howie. “We’re conscious of the business environment our customers operate in. They’re under pressure and that’s why we have traditionally adopted a conservative approach to our finances.”

Why is water so complicated?

Rosalie Auricht grew up on a farm in South Australia, but she wasn’t familiar with the water industry until she joined Renmark Irrigation Trust. “It’s been a big learning curve,” she says. “I find it unnecessarily complex. It is far more complicated here than it is in the UK or United States.”

Auricht recommends the book, Sharing the Water: 100 years of River Murray politics (2017), by Chris Guest, a former public servant and economist. He explains the origins of the Murray-Darling Basin Agreement, originally conceived in 1914 as the River Murray Waters Agreement. Over time, there have been 15 iterations and it may be Australia’s longest-standing intergovernmental compact.

Triple bottom line

The third pillar of Renmark Irrigation Trust’s work is environmental sustainability. This appealed to Rosalie Auricht, who took up the role of the trust’s general manager in April 2019.

“The key attraction for me was the visionary nature of the trust’s board and the quality and passion of its members,” says Auricht. “It was one of the few organisations I had seen that adopted a triple bottom line.”

The board includes Kate Strachan, David Ludas, James Butler, Ibrahim Demir, Jim Markeas and Sim Sing-Malhi, all of whom are local fruit growers or wine makers.

Auricht became the trust’s first female general manager in the organisation’s 133-year history. A qualified accountant, she previously held a senior position at Australian Red Cross Lifeblood. Having been the trust’s business manager since 2015, Auricht knew she had her work cut out in navigating a highly fractured landscape.

“Renmark [Irrigation Trust] has never aligned itself with any political party and it remains apolitical,” she says. “However, the government’s policy of water reform and the impact of that has required the trust to take an increasing advocacy role.”

This includes writing submissions for high-level inquiries into water management, including the current ACCC Murray-Darling Basin Water Markets Inquiry.

Refreshing the team

Auricht has reinvigorated the trust through a series of organisational restructures, and made recruitment “less haphazard” by introducing new processes.

“There were a number of key staff who were close to retirement and there was no succession plan in place,” she says. “We were also concerned that technology was becoming increasingly important yet we only had a small team in that space. Staff were tentative at first — we’re an old organisation and things hadn’t changed in many years.”

In 2016, the Renmark Irrigation Trust became the first irrigation body in Australia to enter a partnership with the Commonwealth Environmental Water Holder to return water to parts of the environment that have suffered long-term degradation due to past irrigation practices.

In 2018, it became the first irrigation scheme in the world to be awarded gold-level certification by the Alliance for Water Stewardship. This certification recognised excellence in governance, efficient use of water, and partnerships with community groups in environmental restoration. Earlier this year, Renmark Irrigation Trust was awarded platinum-level certification, the highest attainable level.

Auricht is thrilled with formal recognition, but says other moments have been equally satisfying, such as when she saw the first female black swan build her nest on the local floodplain.

Water investment

Compared to the ASX, Australia’s water market is minuscule. Water is finite and the Australian government has put restrictions on how much can be traded and how much must be retained for the environment. About 75 per cent of the Murray River is available to water traders, which is equivalent to $17.5b in tradeable water rights.

Only a handful of institutional fund managers invest directly in water, and not a single retail fund. Only two easily investible shares could be described as offering direct exposure to the water markets: agricultural company Webster and ASX-listed fund Duxton Water.

There are four water exchanges with “national footprints”: H20X, Waterfind, Ruralco and Water Exchange. However, these are less like exchanges and more like broker portals. Prior to these platforms bringing in real-time pricing, brokers could quote whatever they liked. Transparency has improved, but also allowed in a vast array of outsiders.

Trade on any of these platforms and you’ll soon realise all water is not equal. There are several hundred classes of investible water securities. There’s high- and low-security water, and prices can vary drastically by type, demand and geography. The allocation allowances vary from river to river; you have to know what drives value and which agriculturalists are in the market.

“You have to know what commodities that water supports, the drivers of climate in any particular region, and what’s happening around supply and availability in the area,” says Argyle Capital Partners MD Kim Morison. “Farmers know this, but the man on the street won’t have a clue.”

Most want to see a centralised exchange, or at least centralised information, but Morison doesn’t believe it will work given the huge variations in demand, rainfall and storage across the river system. He says the bid-offer spreads can be enormous.

Just to complicate things even more, the Murray passes through three different state jurisdictions, all of which have different rules and regulations. In one case, a buyer and seller may be on the same part of the river, but one is in NSW and the other in Victoria. Each state has different registry systems, different water entitlement types and allocation announcements. “Unless all states agree on uniformity, it’ll be very tough to have a centralised exchange,” says Morison, adding the water market is more like a private treaty market than a share exchange.

Meanwhile, in Northern Queensland, blockchain startup Civic Ledger and the Cooperative Research Centre for Developing Northern Australia are trialling the Water Ledger platform. Developed by the ASX, it is hoped the tech platform will help manage the trade in temporary water rights and provide transparency to the Murray-Darling water market.