Water, the basis of life on Earth, began trading on the commodity futures market on Monday due to the scarcity of this good, whose price will now fluctuate like oil, gold or wheat do, he reported. CME Group
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The Nasdaq Veles California Index
Water Index, with the « ticker » NQH2O, is based on a price indicator
of the futures of Water in California which today traded at about 486.53
dollars per acre-foot, a measure of volume commonly used in
United States equivalent to 1,233 cubic meters.
The price of
Water in California it has doubled in the last year according to this indicator
and with the greatest scarcity of this good, together with the key air for life,
the arrival on the market of raw Materials will allow according to experts
better management of the future risk associated with this asset.
Farmers, funds or municipalities may protect themselves or speculate against changes in the price of Water.
CME Group, the new contracts will allow better risk management
associated with the scarcity of Water and make a better correlation between
supply and demand in the markets.
Although the index is based on
prices for California’s major river basins, where
the scarcity of Water has increased, this value can be used as
reference for the rest of the world in the markets of the Water.
futures contracts do not require physical delivery of Water and they are
purely financial, based on the weekly price averaged between the
California’s five major watersheds through 2022.
The 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.
China and the United States are
the world’s main consumers of Water and according to the United Nations
2 billion people live in countries with serious health problems
access to Water, while in the next few years two thirds of
planet could experience lack of water and millions of people
The excessive exploitation of these resources by
the primary sector, industry and human consumption, as well as the exchange
climate, have led to this resource becoming increasingly scarce.
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The lack of water
Two billion people now live in nations plagued with problems of Water, and almost two-thirds of the world could face lack of water in just four years, said Tim McCourt, global head of equity index and alternative investment products at CME, in an interview with Bloomberg.
« The idea of managing the risks associated with water is certainly gaining in importance. »
Currently, if a farmer wants to know how much the Water in California six months from now, it’s kind of a « best guess, » Patrick Wolf, senior manager and head of product development at Nasdaq, told Bloomberg.
Futures will allow market participants to see « what is the best guess of all, » he said.