Markets, mis-direction and motives: A factual analysis of hoarding and speculation in southern Murray-Darling Basin water markets
Loch, Adam, Auricht, Christopher, Adamson, David and Mateo, Luis (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, 65 (2). pp. 291-317. ISSN 1467-8489
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Abstract
There is a long history of concern about speculation in water markets, and potential adverse impacts on agricultural water users. However, applications of traditional analysis into price increase drivers in water markets are challenging due to data limitations. To address this, we use speculation theory, most notably Hirshleifer’s four fundamentals for speculative trade, to examine whether speculation or hoarding price increase drivers are evident in Australia’s largest water market, the southern Murray–Darling Basin. While speculation is likely, and with good reason given the gains possible, we find no evidence of hoarding behaviour in market price or volume trends. It is more plausible that agricultural sectors – notably horticultural users – have driven price increases given their requirements to access water at any cost during periods of low supply. These findings conform to theoretical expectations and help to inform badly needed insights into water market fundamentals required for future analysis. Overall, calls for stricter market controls on non-agricultural water users are not supported by our findings. However, greater transparency in water market and broker activity, arising from substantial improvements in the underlying data and trade regulations associated with water markets, would be an ideal outcome from any public police extension.
| Item Type: | Article |
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| Keywords: | climate change, data analysis, speculative impacts, state contingent model, water trade |
| Depositing User: | Dr David Adamson |
| Date Deposited: | 24 Oct 2024 18:12 |
| Last Modified: | 24 Oct 2024 18:12 |
| URI: | https://rau.repository.guildhe.ac.uk/id/eprint/16791 |
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