Veles Water in The News
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Californians received a double dose of not so happy water news last month; cutbacks were made to water allocations and a key water price index surged higher. Drought fears are heightening due to low reservoir levels and below normal snowpack.
A recently launched water futures market in California drew global attention, from Wall Street to the United Nations. While news of the market has brought both skepticism and speculation, much of the coverage has failed to address some fundamental questions: what actually is a water futures market? How does it work, and who are the players? And most importantly, what are the potential benefits and risks?
Water futures and groundwater trading was the central focus of the most recent meeting of the California State Board of Food and Agriculture. Several panelists and speakers weighed in on how a water trade system like that would impact farmers and ranchers.
A just-launched commodity futures market for the state’s water provides a new tool for farmers, municipalities and other interested parties to ensure against water price shocks arising from drought-fueled shortages.
Said Coogan, “Water is arguably our most precious commodity…” Yet, he “found it hard to believe that no one had quantified water prices and its value previously.” hus began his journey to bring transparency to the price of water and liquidity to investors and end users who will utilize the NQH2O product.
Futures tied to the Nasdaq Veles California Water Index, which measures the volume-weighted average price of water, began trading under the ticker NQH2O on the Chicago Mercantile Exchange on Monday.
Investors will be able to make wagers on the price of water later this year with the launch of futures contracts, which are expected to better balance supply and demand for the commodity and hedge price risks.
The new product, which is subject to regulatory approval, is intended to give agricultural, commercial, and municipal water users “greater transparency, price discovery, and risk transfer,” the exchange said in a release
Future contracts tied to the spot price of water are set to trade on Wall Street for the first time ever this week.
This means farmers, investors and municipalities would hedge against or bet on the future price of water, a resource that is fast becoming scarce in the world.
In September, CME Group Inc vowed to create a new market to help with the risk of these price swings. Last month, the first contract connected to the future price of California’s $1.1 billion water market was inked.