Wall Street Will Trade Water Due To Its Scarcity

Starting this week, water will be traded on the Wall Street commodities futures market, due to its scarcity. The price of the vital liquid will fluctuate just like oil, gold or wheat, CME Group reported. The price of water in California has doubled in the last year, according to the Nasdaq Velez California Water Index. Experts assure that its arrival on the commodity market will allow better management of the future risk associated with this asset. The US company CME Group will launch contracts related to California spot water, a market of 1.1 billion dollars. With the NQH2O ticker, the price of water futures in California was trading today at about $ 486.53 per acre-foot, which is equivalent to 1,233 cubic meters.

Farmers are likely to be the main group who will utilise the water contracts, as they look to protect and hedge their input costs in the wake of climate uncertainties that are set to become increasingly frequent and severe in the future. Plans to launch water futures were first announced by the CME Group back in September this year, amidst the devastation of the wildfire crisis that ravaged across California that spotlighted the serious risk of climate-related impacts on the planet’s water supply.

Nasdaq Veles California Water Index, which started two years ago, already has set a benchmark spot price of water rights in California. It underpinned the volume-weighted average of the transaction prices in most actively traded water markets. In the contracts that are to be traded will include quarterly ones through 2022, with each representing roughly 3.26 million gallons in 10 acre-feet of water area. Nasdaq’s head of product development Patrick Wolf opined that this is kind of ‘best guess’ for a farmer who wants to know what water will cost in California six months from now.

These agreements are the first of their sort in the United States and were declared in September when the west bank of the nation was crushed by warmth and fierce blazes. As per Bloomberg, they are expected to “fill in as security for California’s biggest water buyers against rising costs and as a marker of shortage for financial specialists around the globe.” China and the United States are the world’s primary customers of water. As per the United Nations, 2 billion individuals live in nations with difficult issues of admittance to water. The office gauges that in the following not many years 66% of the planet could encounter water deficiencies and a huge number of individuals will be uprooted by it. The inadequacy of the crucial fluid is identified with the over the top misuse of these assets by the essential area, industry, and human utilization, just as environmental change.