Investing in a dairy operation in the Murray Dairy region provides a unique opportunity to choose how the capital required is employed in the operation.
When buying a farm in a high rainfall region, the cost of the land is linked to the level of rainfall that cannot be separated.
In the Murray Dairy region, rainfall comes in the form of water entitlement that can be separated from land and therefore there is a choice of how much capital needs to be tied up in the combination of the two.
This provides opportunities for younger farmers to move into farm ownership or farm businesses wishing to expand without having to find all the capital required to buy both the land and the water entitlement.
Water can be bought on the temporary market to effectively operate the farm without having the cost of capital tied up in water ownership.
There is also the opportunity to lease water that can improve the certainty of access to the water resource but at a reduced capital cost.
There are some obvious risks of not owning water entitlement as farms are more exposed to the temporary water market and will not benefit in any potential capital gain on water.
However in many circumstances it provides opportunities to grow or to enter into farm ownership that would not be possible if this flexibility did not exist.