CME, Nasdaq to Launch Water Futures Contract

This has been somewhat of a long time coming. Water&#x27;s been on the financial brain for a long time now. From 2012-2018 Harvard&#x27;s $39bn endowment spent $305m on California vineyards that had reliable access to groundwater[0]. It wasn&#x27;t for the wine.<p>[0]: <a href="https:&#x2F;&#x2F;www.businessinsider.com&#x2F;harvard-california-vineyards-water-rights-2018-12" rel="nofollow">https:&#x2F;&#x2F;www.businessinsider.com&#x2F;harvard-california-vineyards...</a><p>edit: correct dates.

I find it interesting that the cost of water is pretty close to the cost of Desalination. 1 acre foot = 1233 m^3. Hyflux has contracts [1] in Singapore (on a multi-year committed contract at volume) back in 2011 for Desalinated water at $0.45&#x2F;m^3 or $554&#x2F;acre foot, which is roughly where the spot market right now is for water.<p>I wouldn&#x27;t gave guessed they would be that close, but it bodes very well for inexpensive energy &#x2F; improvements in desalination technology being a source of water.<p>[1] <a href="https:&#x2F;&#x2F;www.eco-business.com&#x2F;news&#x2F;hyflux-to-produce-worlds-cheapest-desalinated-water&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.eco-business.com&#x2F;news&#x2F;hyflux-to-produce-worlds-c...</a>

I&#x27;m afraid that the dispersal of responsibility among many different parties who benefit under archaic &quot;riparian rights&quot; laws that are totally outdated and unable to be changed because no one cares enough to build the political momentum means that this issue will fester like climate change. And even more than climate, the emotions driving the issue (such as in California) are tangible and exploitable to favor incumbent users.<p>In the meantime as long as it continues, the situation be taken advantage of by those who know how to find holes in the system for concentrated private gain.

Oh goody! Nothing like the financialization of life-necessities to warm the cockles of the heart of big capital.

Next up: Trade in water is trade in grain, corn, dairy, meat.<p>120 gallons of water for an egg 4000 gallons of water for a bushel of corn 11000 gallons of water for a bushel of wheat<p>That is..2 lbs or baked bread is 1000 gallons of water.<p>You are wearing 650 gallons of water if you were wearing a cotton shirt.<p>And wait for this: 135000 gallons of water for a ton of alfafa(which btw we exported cheap to China during California drought because it was cheaper to send that in empty shipping containers going back than truck it to a California dairy farms)

Anybody has read the CME contract specs in detail? One thing I don&#x27;t understand is how can you trade a commodity that&#x27;s all about transportation costs.<p>In some parts of the world water is literally free, you only have to pay for the connection. Whereas in others there&#x27;s a shortage and people have to resort to clever engineering, like Israel with desalination or Libya with the Great Man-Made River project. In both of those cases the problem would be trivial if global transportation costs were zero.<p>Even with oil it is a thing - there&#x27;s a different spot price and different forward curve at each tradeable terminal. For example the recently famous negative prices (and the monster contango) were observed only in Cushing, OK; other ports were always &gt; 0. With water the difference would be much larger.

Michael Burry was way ahead on this too.<p>Also, fun to see the expected seething at anything related to finance here :)

this is interesting. theoretically, more liquidity should lead to more efficiency in the distribution of a commodity . in practice, there are obvious exceptions to this (the hunt brothers &amp; silver, the oil markets from 2006-2010 etc).<p>I also wonder how a futures contract with instant liquidity interplays with standard water bills, which as far as I know are billed at rates that get adjusted yearly at most (at least here in LA).

This is a unique commodity in that it literally falls from the sky. I don’t believe we have any tradable commodities that can be obtained, rather easily, for free. Yes, I know we’re talking about massive amounts of water and aquifers, but I can picture Wall Street banks setting up huge rain catchers and desalination plants to try and profit from this market.

Feels like someone has been reading the water knife