A conference about hedging the risks posed from deviations in the price of a resource, is the kind of gig where most people would expect to find a Martin Place stockbroker.
Hardly the kind of event expected to draw a crowd of Griffith irrigators. That is except when the resource being discussed is water.
Such was the case for the Griffith Water Allocation and Trade Forum held at the Griffith Exies Sports Club on Tuesday supported by AgriFutures and Ricegrowers Association of Australia.
Speaking first at the conference was Neeraj Maini from the NSW Department of Industry addressing how irrigators should interpret the fortnightly resource updates, the Murray Darling Basin, and water ownership.
James Priozzi from Snowy Hydro spoke about how and when Snowy River water contributes to water allocations.
Speaking between the two was Craig Feuerherdt from the H2OX water exchange who gave an overview of water market products irrigators use to maximize the value they get from their water allocations.
“One of the challenges of the water space is that the allocation market is highly variable, there are so many inputs to it, with weather determining the market strengths and so forth,” Mr Feuerherdt said.
“Looking at water products you have got to remove your self from the spot market to some extent and really think about the long term in what value am I getting in terms of securing my water and maybe paying a higher premium.
“H2OX have got a counter party interested in doing water call options in Griffith.
“Call options are (contracts) where you pay a price today which essentially puts your foot on a certain volume of water to used at a certain point in the future and you will have the option to exercise (and pay for) that water use.
“It probably is more applicable when the water price is as high as it it today but It’s a more flexible way of securing than a forward purchase and it allows you to hedge price risk.”
Call options have “been touted in the water market for a little while but H2OX spent the time in getting a contract developed and found a counter party,” Mr Feuerherdt said.
DO YOU WANT MORE GRIFFITH NEWS?
Receive our free newsletter delivered to your inbox every Monday morning. Sign up here