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Allocation trade in Australia: a qualitative understanding of irrigator motives and behaviour

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  • Adam Loch
  • Henning Bjornlund
  • Sarah Wheeler
  • Jeff Connor

Abstract

Governments in Australia are purchasing water entitlements to secure water for environmental benefit, but entitlements generate an allocation profile that does not correspond fully to environmental flow requirements. Therefore, how environmental managers will operate to deliver small and medium-sized inundation environmental flows remains uncertain. To assist environmental managers with the supply of inundation flows at variable times, it has been suggested that allocation trade be incorporated into efforts aimed at securing water. This paper provides some qualitative and quantitative perspective on what influences southern Murray–Darling Basin irrigators to trade allocation water at specific times across and within seasons using a market transaction framework. The results suggest that while irrigators now have access to greater risk-management options, environmental managers should consider the possible impact of institutional change before intervening in traditional market activity. The findings may help improve the design of intervention strategies to minimise possible market intervention impacts and strategic behaviour.
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Suggested Citation

  • Adam Loch & Henning Bjornlund & Sarah Wheeler & Jeff Connor, 2012. "Allocation trade in Australia: a qualitative understanding of irrigator motives and behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(1), pages 42-60, January.
    • Handle: RePEc:bla:ajarec:v:56:y:2012:i:1:p:42-60
    DOI: j.1467-8489.2011.00575.x
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    References listed on IDEAS

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    1. Hughes, Neal, 2009. "Management of irrigation water storages: carryover rights and capacity sharing," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47642, Australian Agricultural and Resource Economics Society.
    2. Brennan, Donna C., 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-21, September.
    3. Anke Leroux & Lin Crase, 2010. "Advancing Water Trade: A Preliminary Investigation of Urban‐Irrigation Options Contracts in the Ovens Basin, Victoria, Australia," Economic Papers, The Economic Society of Australia, vol. 29(3), pages 251-266, September.
    4. Donna Brennan, 2008. "Missing markets for storage and the potential economic cost of expanding the spatial scope of water trade," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(4), pages 471-485, December.
    5. Wheeler, Sarah Ann & Bjornlund, Henning & Shanahan, Martin & Zuo, Alec, 2008. "Price elasticity of water allocations demand in the Goulburn–Murray Irrigation District," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(01), pages 1-19.
    6. Donna Brennan, 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 403-423, September.
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    Cited by:

    1. Ancev, Tiho, 2015. "The role of the commonwealth environmental water holder in annual water allocation markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(01), January.
    2. Sarah Ann Wheeler, 2022. "Debunking Murray‐Darling Basin water trade myths," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 797-821, October.
    3. Juliane Haensch & Sarah Ann Wheeler & Alec Zuo, 2021. "Explaining permanent and temporary water market trade patterns within local areas in the southern Murray–Darling Basin," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(2), pages 318-348, April.
    4. Loch, Adam, 2013. "Sequential decision-making: Theory and evidence for irrigator water allocation trade participation and volumetric choices," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152199, Australian Agricultural and Resource Economics Society.
    5. Connor, Jeffery D. & Kandulu, John M. & Bark, Rosalind H., 2014. "Irrigation revenue loss in Murray–Darling Basin drought: An econometric assessment," Agricultural Water Management, Elsevier, vol. 145(C), pages 163-170.
    6. Juliane Haensch & Sarah Ann Wheeler & Alec Zuo & Henning Bjornlund, 2016. "The Impact of Water and Soil Salinity on Water Market Trading in the Southern Murray–Darling Basin," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 1-26, March.
    7. Grafton, R. Quentin & Horne, James, 2014. "Water markets in the Murray-Darling Basin," Agricultural Water Management, Elsevier, vol. 145(C), pages 61-71.
    8. Simon de Bonviller & Alec Zuo & Sarah Ann Wheeler, 2019. "Is there evidence of insider trading in Australian water markets?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(2), pages 307-327, April.
    9. Ward, Frank A. & Hurd, Brian H. & Sayles, Sarah, 2018. "Water currents in New Mexico: A global reach," Western Economics Forum, Western Agricultural Economics Association, vol. 16(01).
    10. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    11. Nauges, Celine & Wheeler, Sarah Ann & Zuo, Alec, 2016. "Elicitation of irrigators’ risk preferences from observed behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), July.
    12. Guy M. Robinson & Bingjie Song, 2023. "Managing Water for Environmental Provision and Horticultural Production in South Australia’s Riverland," Sustainability, MDPI, vol. 15(15), pages 1-20, July.
    13. Loch, Adam & Wheeler, Sarah Ann & Settre, Claire, 2018. "Private Transaction Costs of Water Trade in the Murray–Darling Basin," Ecological Economics, Elsevier, vol. 146(C), pages 560-573.
    14. Iftekhar, M.S. & Tisdell, J.G. & Connor, J.D., 2013. "Effects of competition on environmental water buyback auctions," Agricultural Water Management, Elsevier, vol. 127(C), pages 59-73.
    15. Bigelow, Daniel P. & Zhang, Hongliang, 2018. "Supplemental irrigation water rights and climate change adaptation," Ecological Economics, Elsevier, vol. 154(C), pages 156-167.
    16. Morrison, Mark & Wheeler, Sarah Ann & Hatton MacDonald, Darla, 2012. "Towards a more nuanced discussion of the net-benefits of sharing water in the Murray-Darling Basin," AFBM Journal, Australasian Farm Business Management Network, vol. 8(2), pages 1-12, April.
    17. Kirby, Mac & Bark, Rosalind & Connor, Jeff & Qureshi, M. Ejaz & Keyworth, Scott, 2014. "Sustainable irrigation: How did irrigated agriculture in Australia's Murray–Darling Basin adapt in the Millennium Drought?," Agricultural Water Management, Elsevier, vol. 145(C), pages 154-162.
    18. Zuo, Alec & Nauges, Celine & Wheeler, Sarah, 2012. "Water trading as a risk-management tool for farmers: new empirical evidence from the Australian water market," Risk and Sustainable Management Group Working Papers 149885, University of Queensland, School of Economics.
    19. Yogi Vidyattama & Leonie J. Pearson & Robert Tanton & Itismita Mohanty, 2017. "Assessing adaptive capacity during the drought period in the Murray–Darling Basin," Asia-Pacific Journal of Regional Science, Springer, vol. 1(1), pages 155-170, April.
    20. de Bonviller, Simon & Wheeler, Sarah Ann & Zuo, Alec, 2020. "The dynamics of groundwater markets: Price leadership and groundwater demand elasticity in the Murrumbidgee, Australia," Agricultural Water Management, Elsevier, vol. 239(C).
    21. Lijuan Zhang & Jinxia Wang & Guangsheng Zhang & Qiuqiong Huang, 2016. "Impact of the methods of groundwater access on irrigation and crop yield in the North China Plain," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 8(4), pages 613-633, November.
    22. Fabien Martinez, 2015. "A Three-Dimensional Conceptual Framework of Corporate Water Responsibility," Post-Print hal-02887624, HAL.
    23. repec:ags:aaea22:335840 is not listed on IDEAS
    24. Adam Loch & Christopher Auricht & David Adamson & Luis Mateo, 2021. "Markets, mis‐direction and motives: A factual analysis of hoarding and speculation in southern Murray–Darling Basin water markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(2), pages 291-317, April.

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