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Water, the basis of life on Earth, began to trade on the commodity futures market due to the scarcity of this good, whose price will fluctuate now like oil, gold or wheat do, CME Group reported.
The index Nasdaq Veles California Water Index It is based on a California water futures price indicator that yesterday, on its first day, was trading at about $ 486.53 per acre-foot, a volume measure normally used in the United States equivalent to 1,233 cubic meters.
The price of water in California has doubled in the last year according to this indicator and with the greatest shortage. The arrival of the raw materials market will allow, according to the experts, a better management of the future risk linked to this good.
Farmers, funds or municipalities will be able to protect themselves or speculate before changes in the price of water.
According to CME Group, the new contracts will allow better management of the risk associated with water scarcity and make a better correlation between supply and demand in the markets.
Although the index is based on the prices of the main river basins of California, where water scarcity has increased, this value can be used as a reference for the rest of the world in the water markets.
These futures contracts do not require physical delivery of water and are purely financial, based on the weekly price averaged across California’s top five watersheds through 2022.
The new index will avoid having to resort to an estimate “by eye” of the future price of water, but what are the expectations of the main players in this market.
