Australia has one of the few markets in there world where water rights can be separated from land, capped and traded, something that still causes angst in parts of the farming community, National Farmers Federation water committee chair and Finley dairy farmer Malcolm Holm said.
"But in essence, what it's enabled the whole thing to do is actually give farmers and industries flexibility," Mr Holm told AAP.
Selling water rights can take the pressure off farmers' and farming organisations' balance sheets when upgrading equipment, transitioning crops or undertaking succession planning.
However, with water-trading pushing growers towards higher value permanent plantings and government buybacks significantly reducing the volume of water available, the next drought could leave some producers high and dry.
"If we get anything near a 2006, 2007 or a 2019/2020-type scenario ... there is going to be a lot of pain because there just simply won't be enough water to go around," Mr Holm said.
The scarcity of Australia's water and the $50 billion market developed to manage it is drawing the attention of global capital.
So much so, it was the focus at Global AgInvesting's latest conference in New York, prompting its next event to be hosted in Brisbane in June - the first time ever in the southern hemisphere.
These events bring together investors representing a combined $10 trillion in assets under management.
Agriculture provides a very stable asset class for investors, GAI's portfolio director Jonathan Levin told AAP.
"While it's a small percentage or portion of their portfolios, it represents a place where you can have steady gains over time and really protect your investments," he said.
Returns in the Australian water and agriculture sector have generated 10 per cent annualised returns for the last decade.
"That's that's pretty very much comparable to, say, investing in commercial real estate in Australia," said Kim Morison, chief investment officer at Argyle Group, a specialist water rights and agriculture investment fund manager.
"It's really about another way to invest in the agricultural sector, to provide capital to farming businesses and allow them to transition to a higher value use of that water," Mr Morison told AAP.
"Which ultimately then makes a good investment return for us ... because the water then graduates to a higher and better use."
Back in Finley, Mr Holm said despite occasional sub-optimal outcomes such as wine gluts and almond overexposure, water rights trading had been positive.
"It's actually allowed irrigators to flex with the seasons," he said.
"Essentially water has become another commodity like buying diesel, fertiliser, or any input into your farm."
The dairy farmer said he preferred water rights were held by investor funds rather than by government, because investors had to pump it back into the production system to see a return.
"They've either got to use it on their own farms or sell it in the temporary water market," Mr Holm said.
"Agriculture still gets to use it."
