Australian farmers trade water to survive

Other places have water trading markets — Chile, South Africa, California — but Australia's is the largest and the most heavily regulated.

The National Water Commission says the trade "allows scarce water resources to be transferred to their most productive uses," and makes up for years of overallocations by state officials who took no account of the downstream effects.

The system has existed for 20 years and in the past, the trade has helped planters struggle through one or two difficult seasons. But nearly a decade of drought has pushed many planters into a financial hole from low harvests and high costs of seed, fertilizer and, now, water.

As in any market, supply and demand drive the water price. A megaliter of water — about 264,000 gallons or enough to fill an Olympic-sized swimming pool — costs about $400. When shortages were at their worst last year, the price was nearly $960 per megaliter.

Holm said his property needs about 2,000 megaliters a year. Last year, Holm bought 500 megaliters to keep the farm going. When prices hit a high last October, he calculated it was cheaper to buy feed to grow it and sold off some of his allocation at a profit.

"In essence, what the water trade does is make irrigators really focus on the economic value of their water and using it more efficiently," Holm said. "If you can't produce a good crop for the cost of the water, you're better off selling it to someone who can. If the figures add up, you buy it."

Holm is anxious. The price right now is too high for him and he is watching his pastures die while he waits for a turn in the market or a drop of rain.

The federal government says the Murray-Darling system is in crisis because of overuse and has launched a sweeping 10-year, $10.5 billion plan addresses rural and urban water shortages. It spends nearly $2.4 billion a year buying water entitlements to pump back into the rivers.

Earlier this month, the federal and New South Wales governments bought Toorale Station, a 225,000-acre water-sucking cotton farm in the state's dry north, for $19 million and announced it would be turned it into a national park. By doing so, Toorale's water annual entitlement of roughly 20 gigaliters — or 1,000 Olympic pools — would be returned to the Darling River.

Critics say even that is a drop in the ocean.

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