Record rainfall and growing concern over the politics of the Murray-Darling Basin (MDB) have not been enough to dent the values and demand for water entitlements in Australia's booming farming regions such as the Murrumbidgee Valley.
With parts of NSW receiving up to 400 per cent of their average annual rainfall during winter, some prices for water allocations have reduced but a trend towards planting crops and orchards such as almonds, which require higher-security water, is keeping some tension around pricing.
In the 2016-17 water year, dams have been filling and rivers such as the Murrumbidgee have flooded.
Water allocations that traded between $200 and $300 a megalitre last year, reflecting the lack of water availability in that season, are now trading at between $50 and $100 per megalitre.
But there have still been major water transactions occurring, and capital raisings have gone ahead for new funds looking to buy into Australia's water market.
It's all happening at a time when federal and state politicians are engaged in a battle to try to take more water away from farmers for environmental purposes.
Australia's water entitlement market is now worth more than $30 billion, and groups such as the Blue Sky Water Fund have had strong returns.
Since inception in 2012, Blue Sky has returned 100pc, and managing director Kim Morison says the record rains and politics are only a temporary setback for the market.
"While wet weather may take the wind out of our sails today, it also builds up the wave behind us," Mr Morison said.
"There is an abundance of supply right now and demand for water this year is down on last year at this point in time because irrigators have not commenced irrigating their fields."
However, he said the return of hot summer conditions will likely stimulate demand and a recovery in water allocation prices.
Water allocations are how much water an entitlement holder is allowed to take in any one season.
Allocations depend on the temporary flows of water.
Blue Sky owns the entitlements and leases out and trades the allocations it receives for its entitlement.
Colliers International's water valuer Alex Delves says water entitlement values – the ones that water funds are likely to own – are not as volatile as water allocation prices.
"Over time, water use has and will transition from lower-value to higher-value agriculture," he said.
"During 2015-16 we saw strong growth in values for water entitlements across a number of classes driven by these long-term factors.
"Whilst this trend has undoubtedly eased in the new water year, there remains a high level of interest in entitlements across the basin."
Last month, Australia's largest listed agricultural property fund, Rural Funds Group, paid $34 million to acquire a 9549-megalitre water entitlement from ACT water utility Icon Water in one of the biggest water deals in the Murrumbidgee Irrigation Area.
Other large transactions have occurred in the past 12 months, including the Chris Corrigan and Peter Scanlan-backed Aware Water company, which purchased at least $100m of water entitlements from the Summit Water company.
The other significant transactions include listed group Webster's $116m purchase of AgReserves Australia's farms, for which more than 50 per cent of the cost was for the water entitlements.
The big transactions have stoked ambitions by numerous funds to raise money and buy in.
Last month, the billionaire Besen family joined National Australia Bank, The Nature Conservancy and several private investors to raise up to $100 million for the MDB Balanced WaterFund.
And in August, the founder of the $870m Duxton Asset Management, Ed Peter, also launched a $99m raising for a new water entitlements fund to be listed on the Australian Securities Exchange and position itself to expand across the Murray Darling Basin.
How they well they succeed will depend on Australia's volatile climatic conditions.
"If rainfall across the Murray-Darling Basin reduces over summer, allocation prices are likely to increase," Mr Delves says.
"However, if a wet summer is experienced, then we are in for continued low volumes of allocation trade and lower prices."
Regardless, he says the value of water entitlements is set to increase over time as annual water use is progressively directed to higher-value agricultural outputs such as nuts.
Another key factor will be political involvement.
Of the 35,000 gigalitres (35 trillion litres) in the MDB, only 11 trillion is used for irrigation. But there is still a push to have more water returned to the environment.
"There will be plenty more politics to come," Blue Sky's Mr Morison said.
"I don't think there will be a large impact on the environment if you take 450 gigalitres, but it would certainly have a big impact on the economic and social side of communities."
- This article first appeared in The Australian Financial Review