In the last two years, the Nasdaq Veles California Water Index has made it possible for California to have its own spot-price water exchange, worth $1.1 billion.
There's no fancy name for the units being traded, but each equals ten acre-feet of water -- about 3.26 million gallons.
Monday, the water market opened upon the national commodities futures exchange.
What's that? Apologies to those WRP members specialize in finance, but to explain to the rest of us: A commodities exchange is the place where companies can sell and buy stuff like pork bellies, wheat, oil, and gas.
Buyers want to lock in the future price of a product they need, so they won't get blindsided by sudden changes in price.
Sellers are looking for a reliable price too. If they've sold a future barrel of wheat for whatever price, they'll be okay if the bottom drops out of the wheat market. (Remember a few years back when farmers suddenly weren't able to sell wheat abroad?)
A water exchange works in California, presumably, because of the contracts for specific amounts of water that farmers have held for years and sometimes generations.
Water users along the Colorado River and on the Ogallala Aquifer have yet to try futures.
It's about time that someone updated those antique water agreements from generations past.
No comments:
Post a Comment