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Sales of Base Annual Production Rights
Generally, the volume of Base Annual Production rights traded is small, with spikes in volume driven by the occasional large transaction. In the second half of 2014, total of 862 AF were traded—compared to 844 AF in the first half of the year and 297AF in the second half of 2013.
Prices have generally trended upward since the market began. In the second half of 2014, the average price was $4,998/AF. The average prices were $5,000/AF in the first half of the year and $4,694/AF in the second half of 2013. There was an unusual drop in the average price in the second half of 2011, which was driven by two transactions in which 4 AF sold for $500/AF and $9 AF sold for $2,500/AF, when prices were otherwise in the $4,000/AF range.
The second half of 2012 saw a spike in both price and volume. Volume was at 6,111 AF, and the average price was at $5,007/AF—the all-time highest average price. Both spikes were driven by a single transaction in which the City of Hesperia purchased 5,971 AF[1] at a price of $5,024.28/AF. (See Valuing A Large Block of Water Rights: Lessons from Rancho Las Flores for more on this transaction). Without this unique transaction, transfers in the second half of 2012 would have totaled 140 AF at an average price of $4,259/AF.
Leases of Free Production Allowances and Carryover
The volume of leases of FPA and carryover water in the Alto subarea tends to fluctuate: high in the first half of the year and low in the second half. Because the Mojave Basin Watermaster operates on a fiscal year, the short-term transfers approved in the first half of the calendar year may reflect efforts to prepare for the new watermaster year.
Volume was 1,332 AF in the second half of 2014 and 2,963 AF in the second half of 2013—while the first half of 2014 saw leases total 22,488 AF.
Much like with the sale of BAP, the average price for leases of FPA have trended upward since the beginning of the market. Prices were at $368/AF in the second half of 2014, $345/AF in the first half of 2014 and $338/AF in the second half of 2013.
Trends have remained consistent for both sales and leases since the market began, so expect more of the same.
Written by Marta Weismann
[1] Prior to the sale to Hesperia, this BAP right was transferred from the original owner to a bank due to foreclosure. Because the transfer to the bank was not a market transaction, it was excluded from the analysis.
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