Murray-Darling water rights

The Guardian has an interesting piece out on irrigation in the Murray-Darling.

https://www.theguardian.com/environ...-under-strain-as-tree-plantations-increase-41

Excerpts:

"In the 20 years from 1997 to 2015 the area under irrigation in the Sunraysia district increased by 41% or 45,000 hectares, according to the Sunrise project that uses aerial photos to map land use.

"In Mildura, between 2005 and 2009 during the millennium drought, large areas under irrigation were left to die after farmers who had been reliant on purchasing temporary water found themselves facing impossible prices.

(Ash here)

SHV's 2017 annual report Note 13 on intangible assets values its permanent water rights at $31m. They are valued at historical cost - which could be and likely is considerably different to market value.  It has been consistently buying and selling these rights and building the asset. Prudence dictates it secures appropriate permanent rights before planting new farms.

SHV can put its hand on its heart and say not a drop of almond irrigation water is wasted and it takes great care to minimise losses to evaporation through drip irrigation, accurate dosing and time of day watering.

Of course, the phrase 'permanent water rights' has little meaning if rivers run dry in drought, but will be serviced in full ahead of temporary rights.

Governments are actively buying back irrigation rights to increase environmental river flows. See: Cubbie Station.  This has the indirect benefit of improving the quality of permanent water rights and hence their value.  Interestingly, the rights are a form of property title over the watershed, which can be national parks, state forests and upstream farmers.

SHV says little about this critical element of the business.  Quite right.  Holders should carefully note movements in this asset as SHV trades its position to closely match need.

I reduce my sentiment to hold on recent upward price movement.

Ash