California has recently established a water futures market that has brought with it some criticism as well as confusion. As the first of its kind in the country, it will function similarly to futures markets for other commodities. The market will allow water users to lock in a particular price they are willing to pay for water. This new futures market is entirely different from water markets that allow the purchasing of water allocations.
Water is joining gold, oil and other commodities traded on Wall Street, highlighting worries that the life-sustaining natural resource may become scarce across more of the world.
Farmers, hedge funds and municipalities alike will be able to hedge against — or bet on — potential water scarcity starting this week, when CME Group Inc. launches contracts linked to the $1.1 billion California spot water market. According to Chicago-based CME, the futures will help water users manage risk and better align supply and demand.
The contracts, a first of their kind in the U.S., were announced in September as heat and wildfires ravaged the U.S. West Coast. They are meant to serve both as a hedge for California’s biggest water consumers against skyrocketing prices and a scarcity gauge for investors worldwide.
The Water News Network is San Diego County’s source for water news and information.
