empty water trough

California isn't the only major dairy region dealing with water woes. Australia has its issues, too. And as the world's fourth-largest dairy product exporter, short supplies of water could further curtail milk-related sales.

Australia's potential woes began compounding in 2007 when its government decoupled water rights and land ownership. With that move, investors became eligible to buy and sell water rights without owning land.

Since then, water prices have climbed sky-high, especially when factoring in the country's ongoing drought. That's because foreigners, like a dry sponge, are soaking up Australia's water. Foreign ownership of water went from essentially 0 percent in 2007 to 14 percent just six years later, reported Agriculture Minister Barnaby Joyce.

Realizing the potential disaster that has been created, some Aussie lawmakers and farmers are working to change laws so foreign investors must declare water ownership.

What has been the economic impact so far?

In Australia's northeast state of Queensland, dairy farmers are being outbid by nearly everyone for water. Dairy farmers have been offering roughly $190 per a megaliter of water, reported The Wall Street Journal. Meanwhile, foreign investors bid as high as $16,000 to move water to strawberries for eventual export. (As a point of reference, 2.5 megaliters of water will fill an Olympic swimming pool.)

While selling water rights brings revenue to the country, it strips its citizens' potential to improve agricultural output. And for Australia, which uses nearly 50 percent of its water for agriculture, that is a big deal.

How this issue plays out will not only impact dairy farming in the country, but, more importantly, Australia's long-term future.

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(c) Hoard's Dairyman Intel 2016
April 18, 2016
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