Water has joined 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 are now able to hedge against — or bet on — future water availability in California, the biggest U.S. agriculture market and world’s fifth-largest economy. CME Group Inc.’s January 2021 contract, linked to California’s $1.1 billion spot water market, last traded Monday at 496 index points, equal to $496 per acre-foot.
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 and as California was emerging from an eight-year drought. They are meant to serve both as a hedge for big water consumers, such as almond farmers and electric utilities, against water prices fluctuations as well a scarcity gauge for investors worldwide.