Futures linked to the Nasdaq Veles California Water Index began trading on the Chicago Mercantile Exchange in early December, representing a whole new way to buy water. Amid concerns about climate change and resource scarcity in a state that uses four times more water than any other, turning H2O into a commodity akin to oil or cattle enables farmers, municipalities, and funds to wager on future pricing. According to Bloomberg, CME Group Inc.’s January 2021 contract finished on December 7 at $496 per acre-foot with two trades.
The announcement of the first-of-their-kind contracts came back in September as relentless wildfires and scorching heat sizzled much of the state. California was in a drought from December 2011 to March 2019, during which time water transactions totaled some $2.6 billion. Each contract represents 10 acre-feet of water or roughly 3.26 million gallons.
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