California’s Commodity Creation: Water

Last week in California, water became a commodity crop.

And like many resources with a supply- and demand-strained relationship, water found its way to a futures contract.

Investors across the globe now have access to the CME exchange where they can buy and sell the right to purchase water at a particular price tied back to the state’s $1.1 billion water spot market.

The Farmer Effect: Producers who get in on the bidding will have the chance to protect their water costs against price jumps and lock in some stability. For a state that uses 4x more water than any other state in the country, producers won’t be passive in their attempts to protect their pocketbooks.