A new report says the demand for irrigation water in the southern Murray-Darling Basin is about to go nuts, because of nuts.

The study funded by the Rural Industries Research and Development Corporation and conducted by water market advisory specialists Aither says expansion of cotton and nut production in the next five years will put significant pressure on water supplies.

It estimated that water use would increase by around 65 per cent for cotton and 18 per cent for fruits and nuts.

The analysts conducted wide-ranging interviews with irrigators, water authorities, government agencies, brokers and processors in the Riverland region of South Australia, Goulburn and Sunraysia in northern Victoria and the NSW Riverina region.

While they predict an increase in demand, the research found that in a lot of places, things are going the other way.

The report reveals that in the districts investigated, the number of companies using agricultural irrigation had actually declined by around 4 per cent per year.

Some regions had particularly large falls including north-east Victoria (down 6.6 per cent per year), Mallee (at minus 5.1 per cent per year) and South Australia’s Murray Darling Basin (dropping 5.0 per cent per year).

The experts say water demand shifts over time due to changes in input and commodity prices, rainfall and production technology.

But they predict that rapid expansion of permanent plantings, particularly almonds, may mean there is not enough water to keep orchards alive during extended dry seasons.

“The challenge for government policy, is to plan for irrigated agriculture as it will be in 20 years, rather than irrigated agriculture as it is today,” Aither director Will Fargher told the ABC.

“Over the forward five-year period we are approaching the point where in the low water allocations years, almost all the available water allocation will need to be directed at permanent plantings, if the forecast permanent plantings is to receive the necessary water allocation.

“Recognising that water demand for these crops, like almonds, will increase as they mature.

“That obviously has significant implications for lower value uses and some of the annual crops, but also the lower value permanent plantings.”

“Infrastructure investments are long-lived and the consequences of putting the wrong asset of the wrong size, in the wrong place, will be felt by individual irrigators for many years to come.”