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Wall Street Begins Trading Water Futures as a Commodity
- Faaak 6y agoI suppose that most reactions will be against this, but it should however fix the "tragedy of the commons" problem where water is overused when it is cheep but still used when it's not. It's a good financial incentive to better your installations.
- mmanfrin 6y ago> It's a good financial incentive to better your installations. No it is not. The cost of water is so tiny compared to anything else on earth humans make that every single country on earth should be able to provide it to their citizens. This is not a problem the market needs to solve. This has been solved since prehistory, and some of the first non-religious constructions celebrated in human history are waterworks. This is a solved problem. All futures do is allow traders in faraway places make money off of a substance every human on earth ought to have a fundamental right to.
- pseingatl 6y agoSolved? If you mean by energy-intensive, billion dollar solutions, you are correct. Look at the UAE, Saudi Arabia; no rivers, no lakes, and the aquifers were long ago exhausted.
- sideshowb 6y agoSolved? Um. why then are there droughts currently, and why are they projected to increase under all plausible climate change scenarios? Like you though I'm uncomfortable with the idea of a futures market
- emteycz 6y agoThe same was said about food and toilet paper.
- kortilla 6y agoIt’s not a solved problem. The Colorado river is oversubscribed and people are more or less fucked because we didn’t think paying for water in a bidding system was a good idea so now farmer Ted gets priority to grow his Almonds in the California desert for free while people in Nevada can’t get enough just to drink from the Colorado.
- adrianN 6y agoRight now the cost of water is tiny in many regions because we deplete fossil water reservoirs without properly accounting for the externality.
- Aerroon 6y agoThe cost of water might be tiny if you're drinking it, but it's not tiny when you're using it to grow food or use it for other industrial processes. One almond kernel requires 3-4 days worth of drinking water to grow. Also, humans in many places are using groundwater that's thousands of years old. In those places we can't observe any effect humans have had, because we're effectively tapping into reservoirs that predate human usage of that water. Eventually that's going to run out.
- paulluuk 6y agoI think people are afraid that instead of "tragedy of the commons", this will turn into "tragedy of the anticommons". e.g. a solution to global water shortages might be possible, but if it's not profitable then it won't happen. https://en.wikipedia.org/wiki/Tragedy_of_the_anticommons https://en.wikipedia.org/wiki/Tragedy_of_the_anticommons
- eru 6y ago(Futures) markets work for basically every other commodity they've been tried. So the presumption is that they'll work here too to allocate scarce resources fairly and efficiently.
- chr1 6y agoMost people misunderstand how the futures work. This fee podcast explains well why it is a useful tool and not a fraud as many think https://fee.org/shows/audio/words-numbers/a-game-of-risk/ https://fee.org/shows/audio/words-numbers/a-game-of-risk/
- iSnow 6y agoFutures have nothing to do with better management of a resource, it's strictly a bet traders can place. If you are in favor of financial instruments to steer demand, a simple tax would work. Creating water futures is completely tone-deaf. All it will cause is outrage and a backlash, a lot like trying to patent human genes.
- Faaak 6y agoI don't really see the relationship between futures and patent on human genes.. However, futures are NOT only for traders as you suggest. Of course, a residential home will not use them, but when you become a big player in the field (see an Almond farm for example), then your water usage starts getting important and you can use these products. Take a look at potato futures for example, they're used and useful. Some farmer's cooperatives don't hedge their prices and had some very bad news this year with covid and the impossibility to sell their yield.
- konschubert 6y agoWhy do people eat less potatoes during covid?
- eru 6y agoPeople are eating more at home and less in restaurants. Shifts in diet are plausible. (Just speculation. And potato prices might have changed for reasons independent of covid.)
- lend000 6y agoMost water in the region isn't used for drinking -- there's plenty for that. Example use case: almond farmer buys 0.5% of the current capacity of the reservoir at the now liquid market price, with delivery 6 months from now. Instead of having cyclical "rushes on the reservoir" for the remaining farming allotment of water in the reservoir whenever capacity gets low (or just unexpected bouts of no water coming out of the faucet, when transparency into reservoir levels is poor), resulting in less efficient water practices/ruined crops, liquid futures provide farmers with stability and actionable planning. If an almond farmer buys futures delivering a million gallons of water each quarter, he can expect that water to be saved and available when the crops need it, and can plan crops around that. Other side effects: prices will be more transparent, liquid, and consistent across the region. Possible bonus: the financial incentive will potentially improve the quality of drought modeling in the region. Imagine future weather computers that use the futures price as an input.
- einpoklum 6y agoLike the "tragedy of the commons", it is artificially caused by concentration of power in the hands of the few. People were well able to coordinate use of the original commons; and if it weren't for belligerent ruling classes and corporate-commercial interests, the people of the world could have handled the water issue reasonably well to day.
- tedk-42 6y agoUmm what's the incentive or motivation behind making this trade able? At first glance this seems incredibly concerning, especially if we ever get to a point where some people can 'afford' water while others can't. While we don't need oil or gold for our immediate survival, they do play key roles into how our society operates. I'm hoping to understand more on why we should treat water in the same way.
- easytiger 6y agoThe same reason grain and cheese have derivative markets Michael Burry, of Big Short fame, is well known for moving his interest to water investment/trading many years ago https://www.killik.com/the-edit/why-michael-burry-is-investing-in-water/ https://www.killik.com/the-edit/why-michael-burry-is-investi... This article goes some way to explaining the rationale
- puranjay 6y ago> The same reason grain and cheese have derivative markets Grain and cheese are the product of human activity. Fresh, clean water exists in plenty in nature.
- harperlee 6y agoI may need coffee, but what problem is entailed by what you state?
- VMG 6y agohttps://en.wikipedia.org/wiki/Water_conflict https://en.wikipedia.org/wiki/Water_conflict
- stevesimmons 6y ago>Fresh, clean water exists in plenty in nature. Except in the places/times it isn't, which is much of the world for some of the time, and some of the world for much of the time. Water rights exist, and who gets to exercise them in times of shortage can be very contentious, and even a cause for war.
- tdons 6y agoI remember hearing about Michael Burry [1] also looking into aquifers and future water shortages. [1] https://en.wikipedia.org/wiki/Michael_Burry https://en.wikipedia.org/wiki/Michael_Burry > Burry has focused much of his attention on investing in water, gold, and farm land. Burry has been quoted saying "Fresh, clean water cannot be taken for granted. And it is not—water is political, and litigious."[20] At the end of the 2015 biographical dramedy film The Big Short, a statement regarding Burry's current interest reads, "The small investing he still does is all focused on one commodity: water."[20]
- jansan 6y agoMichael Burry is one of the people I like listening to, just like Peter Thiel. He always has interesting ideas.
- jeffreyrogers 6y agoCareful, you're not allowed to praise Thiel too heavily on HN :) I'll have to look into Burry some more. He sounds interesting.
- tsimionescu 6y agoReminds me of a famous video[0] of the CEO of Nestle explaining that there exists an "extreme position" that water is human right that everyone should have access to. [0] https://www.youtube.com/watch?v=oR_KXZZc13U https://www.youtube.com/watch?v=oR_KXZZc13U
- yodelshady 6y agoHow much water is a human right? We know what happens if you don't set a per-person limit to, at least, how much is free. But that's rationing (?) and evil, apparently. I'm not entirely sure of the terminology, and I suspect there's a deliberate effort to ensure the idea of both government and free market supplies in tandem stays out of popular consciousness. See "death panels" for healthcare... if you can't compete with government, perhaps your business just isn't very good. Alternatively, Universal Basic Income. Then, assuming your goal is to ensure people aren't dying due to lacking basics, you've only got one parameter to tune and one to monitor.
- deleted 6y ago[deleted]
- kome 6y ago"Proponents argue the new market will clear up some of the uncertainty around water prices for farmers and municipalities" ahahah. sure, setting up a market like this will surely reduce uncertainty and not increase it exponentially.
- pseingatl 6y agoThe Great Lakes will be the new Ghawar (Saudi Arabia's oil field, an ocean of oil).
- waterheater 6y agoIt won't. The Great Lakes Compact forbids, except under exceedingly rare circumstances, water diversion from the Great Lakes watershed. https://en.wikipedia.org/wiki/Great_Lakes_Compact https://en.wikipedia.org/wiki/Great_Lakes_Compact
- blahedo 6y agoWhich is why Chicago, Toronto, and other Great Lakes cities will be the booming metropolises of the late 21st century.
- eru 6y agoDo you expect water to become globally scarce?
- kortilla 6y agoThat compact will be wiped out by the federal government the minute things become dire.
- eru 6y agoWould you be willing to entertain a bet on that?
- kortilla 6y agoIt’s stupid to think otherwise . If it came to a matter of national hunger due to crop water shortages or drinking water shortages the federal government would use the military to dig a fucking canal across the country if they needed to.
- mikaeluman 6y agoMore things traded means more information and better prices. Runaway prices can function as a clear signal that there are problems in the water supply that need to be addressed. On the other hand, a stable market will be an indication that the infrastructure works, and prices will reflect that trade-off between speculators and market participants bearing risk, versus commercial users hedging to get stable future costs. Markets are a wonderful creation and should be welcomed.
- logicchains 6y ago>Markets are a wonderful creation and should be welcomed. No, markets are evil, because my left-leaning university professors told me they are, and having a high-paying tech jobs makes me an expert at things I know nothing about.
- jacobwilliamroy 6y agoI just wish people would actually put effort into achieving these side effects instead of just alleging that they will emerge naturally out of the behavior of a bunch of random people betting on water scarcity. I am extremely skeptical the market will do all these extra things you claim it will do.
- logicchains 6y ago>I am extremely skeptical the market will do all these extra things you claim it will do. Why are you so sceptical it won't do those things for water when it's done those things for other commodities? Ask a large scale farmer how worse off they'd be if they couldn't hedge their harvest risks with futures.
- jacobwilliamroy 6y agoBecause those other commodities are not water and Americans have a very bad habit of using cherry-picked anecdotes to justify poor management and decision-making. Just stop pretending like you give a shit about anything other than money. I'm sick of being gaslit by people like you. Talk about prices. Play your money games. But please stop pretending like you actually know anything about the real world, just because you play with money all day.
- m4r35n357 6y agoScum
- fdr 6y agoMay be worth reading this article about Harvard's endowment consolidating water rights in California as well. https://www.wsj.com/articles/harvard-quietly-amasses-california-vineyardsand-the-water-underneath-1544456396 https://www.wsj.com/articles/harvard-quietly-amasses-califor...
- greyface- 6y agohttps://archive.is/CtUVO https://archive.is/CtUVO
- shaunray 6y agoBen Rickert, is that you?
- pulse7 6y agoHmmm... access to water is a basic human right... trading with water is... dangerous...
- VMG 6y agoWhat do people mean by this? How much water is a human entitled to? Who has to provide it to that person? If somebody has no water, who is violating their rights?
- nicbou 6y agoYou know what? Nobody asked that question before, and I find it a bit difficult to come up with an answer. I suppose it just means "we consider access to this resource too important to deny it to anyone, whatever the reason". It's the ground upon which policy should be decided.
- VMG 6y agoRefusing to deny access to water will guarantee shortages, since water is a scarce resource.
- ohgodplsno 6y agoWho are you referring to when you say "deny access to water"? Because if you are talking individuals, congratulations, you are actively calling for the death of individuals. Water may be scarce, but the amount available still is much more than enough for living beings.
- runawaybottle 6y agoThis is just embarrassing. Today I’m ashamed, once again, of being human. Sometimes you have to spell it out for these animals, life, liberty, pursuit of happiness, and water you dumb animals, and water too, why must this be said? If social media shaming should be used for anything, it should be used for this. Speculation markets lead to speculation.
- avvt4avaw 6y agoYesterday's traded volume in water futures - 16 contracts. In Bitcoin futures - about 7,000 contracts. In S&P 500 futures - about 1.9 million contracts.
- oblio 6y agoDidn't they just launch water futures? I doubt they traded 1.9 million S&P 500 futures the first week those were launched :-)
- avvt4avaw 6y agoVery true :)
- silvester23 6y agoThat's a huge difference for sure, but wouldn't we need the volumes of the contracts for a fair comparison?
- avvt4avaw 6y agoA water contract is worth about $5,000, a Bitcoin contract is worth about $88,000 and an S&P 500 contract is worth about $183,000.
- nine_k 6y agoWhat is the size of these contracts? I traded three stocks yesterday, but the sum total of these 3 trades is below $3k. A thousand of trades like mine would be worth one trade for $1MM.
- avvt4avaw 6y agoA water contract is worth about $5,000, a Bitcoin contract is worth about $88,000 and an S&P 500 contract is worth about $183,000.
- nickparker 6y agoScrolled pretty far and haven’t seen mention of this: Water shortages will be entirely solved in the next decade by cheap renewables and desalination. Clean water can be manufactured, and effectively free electricity will make it dirt cheap
- ohgodplsno 6y ago>effectively free electricity will make it dirt cheap Effectively free? For a first world country, maybe. But the countries where water shortages are an actual life or death situation already have trouble getting a good enough power grid. Noone is going to show up to a village in the middle of Ghana and install solar panels for free so they can have water. This is a horribly first-world centric point of view.
- perched_robin 6y agoAren't there charities doing literally that?
- chordalkeyboard 6y agoYes, the website hasn't been updated but these guys are constructing a well in Kenya this year. https://www.globeleadership.com https://www.globeleadership.com
- christophilus 6y ago> Noone is going to show up to a village in the middle of Ghana and install solar panels for free so they can have water. There are plenty of organizations who will do exactly that. But I think I agree with the general slant of your comment, which is that much of the world will have to rely on the charity of the developed world to solve this problem for them. That charity is not guaranteed to be timely, effective, or predictable.
- wurstfinger 6y agoFunny you should choose Ghana as an example. They have actually overbuilt their power generating capacity in recent years and are looking for ways to fruitfully soak up the excess electricity (e.g. electric vehicles https://cleantechnica.com/2020/07/20/ghana-pushes-for-adoption-of-evs-to-soak-up-excess-electricity-generation-capacity/ https://cleantechnica.com/2020/07/20/ghana-pushes-for-adopti...)
- dragonelite 6y agoI don't really mind water futures, as long as the nation I'm in makes it easy and affordable to access clean drinking water. If the nation becomes to much of a dystopia I will just use my most powerful vote "my feet" and take my labor to some other nation. People throughout history have done this for millennia. Just make sure you have a exit plan and easily transferable wealth storages.
- runawaybottle 6y agoHoly crap man for thirty seconds try to think about how you don’t represent the majority of the people. You know what, go trade water futures, you’re born for it. This topic should be a collective home run for ethics, but the sheer stupidity of humans knows no bounds. Sometimes you just need to call the antisocial personality disorders out (one whatever spectrum - narcissistic, sociopathic, borderline). A lot of the behavior of these disorders are tolerated if you are mostly harmless, but don’t think we can’t spot you. Bunch of jerkoffs want to speculate on water, give me a fucking break.
- dragonelite 6y agoThe world is not a fair place and I got lucky that I was born in western Europe and did not made to many bad choices in life. I have talked with people about rising house prices(because of the low interest rates) and stagnated wages for blue-collar workers here in the west, how most of us in our late 20s or younger will probably never have a proper pension. How cruel and unfair this hyper capitalist system really is, how we are quickly devolving back into techno feudalism. How the youth is spending their future income by accruing massive debts to buy the latest gadgets and shit. Reality is people don't fucking care, people don't want to care, they look at you as if your some kind of conspiracy theorist. Once I discovered people don't really care about those structural problems, was the moment I started putting some money into a exit plan.
- twoslide 6y agoThat's great you have a plan but this is not really an option for much of the world's population and perhaps they should not suffer lack of water because of this.
- deleted 6y ago[deleted]
- santaragolabs 6y agoThis reminds me of the science fiction novel The Water Knife by Paolo Bacigalupi. From the Amazon description: "In the near future, the Colorado River has dwindled to a trickle. Detective, assassin, and spy, Angel Velasquez “cuts” water for the Southern Nevada Water Authority, ensuring that its lush arcology developments can bloom in Las Vegas. When rumors of a game-changing water source surface in Phoenix, Angel is sent south, hunting for answers that seem to evaporate as the heat index soars and the landscape becomes more and more oppressive." Highly recommended read.
- baq 6y agothis is the strongest signal yet that we're heading for a disaster as a civilization. if water can't get to people, people will get to water, or at least try to.
- kwere 6y agono, everthing is scarce on this material world and pricing items like water (accounting even ecological costs) could be a way to make people people/corps accountable of their choices.
- tasuki 6y agoHow does trading water futures cause "water can't get to people"?
- baq 6y agoIt isn’t the cause. It’s a sign that it’s already happening and maybe an attempt to remediate the issue somewhat.
- terramars 6y agoI agree this is ripe for abuse, but I also know enough about the CA water ecosystem to know it's a welcome development from an agriculture capacity planning perspective. There may be some speculators, but overwhelmingly the people trading this product will be water utilities and large farms who need multi-year planning for in particular tree crops. It looks like it's purely a cash backed contract and there isn't delivery, so it's going to just be used for hedging. Privatization of water is a huge issue especially in the developing world, but this isn't the same problem. EDIT for clarification : water is a basic human right, but pumping 1 million acre feet to grow almonds and make bank is not.
- opinion-is-bad 6y agoI agree that tree crop farmers can really benefit from access to this type of product. I am a little concerned that this will only encourage even riskier nut development when the aquifers are already stressed as much as they are. I am still hopeful that California will consider something similar to cap-and-trade for water rights, but for now I guess we just have to wait and see what all those little SGMA districts come up with instead.
- eru 6y agoWhy do they even need cap-and-trade? That would at most be a second best. Just make water rights fully tradeable. Of course, you might also want to remove grandfathered water rights. Good luck getting that past the lobbyists. But even with the existing silly initial distribution of water rights, making them fully tradeable would increase efficiency: The almond farmer would still get lots of water, but at least he'd turn into a former almond former and just sell his water on the market to someone with a better use.
- an_opabinia 6y ago> that this will only encourage even riskier nut development What risks? Farm income this year has tripled entirely because of subsidies. It is obviously completely and utterly irrelevant how you structure water markets or who's buying and selling what nuts, in a world where a 10 minute decision in an afternoon can 3x profitability.
- jokoon 6y agoYeah it really reminds me of the end of "The Big Short", where the character played by Brad Pitt starts following any news like this related to water.
- opinion-is-bad 6y agoCurrent price is just under $500 for an acre-foot of water, and you have to buy in increments of 10 acre-feet. If you are unfamiliar with that unit of measurement, it’s pretty much what it sounds like. It’s the amount of water needed to cover one acre of land in one foot of water and is equal to 325,850 gallons. It is standard in agriculture to measure water output to crops in inches and feet because this makes the calculations for water usage much easier. For additional context, almonds use about 4 acre-feet of water per year and over the last ten years have generally been able to gross from a low end of $5000 an acre to upwards of $15000 depending on yield and price. Considering costs remain essentially fixed regardless of gross in almonds, this water price would therefore range from ruinous to fairly inconsequential.
- m1ckey 6y ago1 acre-foot = 1233m^3 = 1233000L 0.41$ / m^3
- themodelplumber 6y ago> almonds use about 4 acre-feet of water per year Q: What unit of almond measurement uses that measurement of water?
- jelliclesfarm 6y agoThe troubled and now almost defunct Hyflux has contracts in Singapore (on a multi-year committed contract at volume) back in 2011 for desalinated water at $0.45/m^3 or $554/acre foot. 1 acre foot = 1233 m^3. very close to where the spot market right now is for water. water futures are trading at almost the same price as is the cost of desalination. make of it what you may.. meanwhile: almonds in california..https://en.wikipedia.org/wiki/Almonds_in_California https://en.wikipedia.org/wiki/Almonds_in_California [..] 1.Almonds were California's third most valuable agricultural product in 2016, accounting for $5.2 billion (about 11%) of agricultural output. The state produces 80% of the world's almonds and 100% of the United States’ commercial supply. 2. Almonds are California's most valuable export crop. Farmers exported $4.5 billion worth to foreign countries in 2016, about 22% of the state's total agricultural exports. The majority of these exports went to the European Union, China and India. While the EU is the largest consumer, the latter two countries are expanding markets where the state's Almond Board has actively marketed the nuts as a healthy snack. As part of the 2018 China–United States trade war, China has imposed a 50% tariff on almonds. As a result, some Chinese businesses have resorted to importing almonds from other producers in Africa and Australia. 3. California suffered a severe drought from 2011 to 2017. In addition to economic consequences for the state's almond growers, the industry came under criticism for its water use. As of 2015, almond cultivation consumed about 10% of the state's water. Furthermore, almond acreage increased by 14% from 2007 to 2014, while almond irrigation increased by 27%. Critics have pointed out that the state's 6,000 almond farmers use roughly 35 times the amount of water as the 466,000 residents of Sacramento. To supplement reduced deliveries from the state's water system, many almond farmers increased groundwater pumping, which can unsustainably deplete aquifers and cause land subsidence.
- zaptheimpaler 6y agoMaking water tradeable in the presence of scarcity will ultimately redistribute some water from where it’s plentiful to people who can pay more for it. i.e it will even further increase inequality.. Of course it’s all rosy and perfect in free market Econ 101 theory land but that’s not how things tend to play out under conditions of inequality in knowledge and access to capital. One example is - if a speculator expects water to get scarcer in the future, they will buy it today and hold it completely unused just to sell it later. The same situation is playing out in the housing market in some cities and now empty homes taxes are being introduced. Of course no one will ever learn from real life, only half baked Econ theory so we will run into the same problems with water a decade later
- short_sells_poo 6y agoThere is no physical commodity changing hands unless the futures contract is held to expiry and delivery takes place. It's not like this product enables speculators to hold on to water reserves better than they can currently. They'd have to have vast warehousing capabilities (or some lakes?) to actually sit on the physical product. Sure, they can try to push the prices by cornering the liquidity in the futures market, but again, to actually have a sustained impact, they'd have to create a shortage in the physical market. This won't change with these derivatives.
- zaptheimpaler 6y ago> It's not like this product enables speculators to hold on to water reserves better than they can currently. The presence of a liquid market where they can sell at low friction at all times is a big incentive to speculate. It’s the difference between speculating on rare trading cards or exotic wines and stocks.
- short_sells_poo 6y agoI disagree with your statement on multiple levels. First, a highly liquid market tends to make speculation less profitable because your opportunities are arbitraged away that much more rapidly. Second, speculators are not necessarily bad and add further liquidity to a market by taking the side that others may not be willing. Third, a liquid market will of course still have speculators, but will be less vulnerable to distortion from truly malicious actors because it is more difficult to move a highly liquid market. An illiquid and opaque market is worse in almost every sense. When things get bad, price discovery is much more difficult and bad actors can actually have outsized influence by cornering what little liquidity there is. You seem to be biased against speculators, but the actors you should be actually biased against are market manipulators.
- JohnJamesRambo 6y agoThis made me think of how people don’t have enough air and it is used for coercion on Mars in the dystopia of Total Recall.
- tankenmate 6y agoAnd again Dr Michael Burry proves he was ahead of the curve.
- jelliclesfarm 6y agoi have written several times about CME water futures contracts. i thought i posted this on HN during this round of news releases, but i guess i didnt. long story short: it is for the almond farmers. but its more complicated. i have been pursuing agtech and SV for small farm ag robotics for 5-6 years now and only have had doors shut on my face. consistently, VCs flock towards agtech opp that are data harvestors. agree that data is crucial for deployment of autonomous systems, ai and robots in the field, but the weird thing was that they were coming up with stuff that farmers didnt need. they were creating entire new categories of data that wasnt necessary before and selling that to farmers who didnt even know that they needed it. there are diff kinds of ag and my focus was on small acreage sub 100 acre farming that needed automation in the field to eliminate labour and bring down labour costs. AI has very little value. but agtech in the past 5-6 years has been collecting and collating so much data. and i knew that it wasnt for the farmers. it was always..ALWAYS for wall street. but i was looking at commodity trading..like hogs, grain, soy and fibre. i was looking at what data they were collecting about water and fertilisers/herbicides/pesticides...so that they can use that data to sell more inputs to the farmers. and let's not forget seed. in 2017, dow and dupont merged. the corteva cropscience was spun off this merger and began trading as a separate company. at the same time, sygenta was sold off to chemchina. and of course, bayer bought out monsanto. this is a consolidation of a handful of companies that have complete control over seeds, pesticides, herbicides, fertilisers, gene patents and biosciences. and now, data. sweet sweet..fat juicy agtech DATA! all you have to do is say AI and then twirl three times chanting 'blockchain blockchain blockchain' while rubbing the top of your head...VCs will rain wads of cash over you. Data makes the world go round. they consolidated and started investing in agtech and robotics and ag machinery sector(hello, JD!) wanted to join in, but DoJ kept squashing the promised mergers. now..remember, ALL of this is traded in the exchanges ALL OVER THE WORLD. not just wall street. ag has to be 'managed'. you need data for that. i could go on that tangent, but its not needed now. (example: climate corp was part of monsanto. but bayer didnt get a piece of it. DCVC was monsanto's VC arm and has since dissolved.) and then the story of california's stolen water from the rio grande and the grandfathering of water rights and the patchwork quilt of various water rights sharing agreement, its a maze and noone really understands that mess. (i can recommend cadillac desert by marc reisner..that was the basis for polanski's movie china town starring jack nicolson and later LA confidential starring russell crowe/kevin spacey. also recommeded fiction reading..waterknife by paolo bacigalupi) anyways, back to water...we now know how much water all the crops need when agtech is unleashed in..let's take ca as an example...salinas' lettuce field(1+billion) or strawberry fields or almond orchards in central valley. each one of the crops have about a billion dollar ave revenue in a 45 billion dollar california ag revenue. wonderful company owned by the resnicks, for example..(pom, halos, cuties etc) has about $4 billion revenue annually. oh. privately held or as ag co-ops. and then there is the dairy and ranching industry. hay/alfafa esp ..which is a good export crop and goes to china in the returning empty shipping containers during our droughts to provide fodder for china's fledgling and largely parched dairy industry because they may have cows, but their aquifers have run dry. ca has so many ag revenue streams but so diverse. agtech start ups found out that they can not only collect data and can consildate it and sell it to various publicly traded companies..perhaps they dont(its illegal), but the information can be used for other products. for example, safeway and walmart are publicly traded and strawberry industry's data has immense value to them. we are not talking soy and wheat or hogs that is the mid western specialty. but even with the diversity of data, most of it is noise. capturing signal from noise is profitable enough. but consider this..what is common for ALL of ag sector. water. we all need water. be it an one acre boutique farm or a 15000 acre commodity crop growing mid western farm. we need water. and is it any surprise that this can be traded as futures? while its packaged as something to hedge because of the recent spate of wildfires and drought and what not in california, the real reason has always been about how this can be used to trade on wall street. agtech has ALWAYS been about wall street and harvesting of data that can be exploited for speculative trade. it was never about the food. that's why i cannot still find a reasonable streamlined solution for labour cost cutting ag robotics for sub 100 acre farms. because we still import most of our food and food growing farms are all really hobby farms. the agtech we need is consumer level and not industrial scale like VC backed agtech. this is going to end very badly.
- KenanSulayman 6y agoThese aren’t water contracts as in “settlement in water” — they’re settled in cash and they’re water INDEX futures. There’s simply no way this will affect actual water shipments beyond maybe being used as hedge for water producers (which is rather unlikely).
- piker 6y agoThis is wrong. Many contracts use cash settlement as an effective way to hedge against an increase in the cost of something. This product provides a hedge for water producers and consumers. To the extent water is a volatile-cost input into agriculture (perhaps an open question), this is likely to see significant usage.
- robviren 6y agoNext stop perri-air.
- skela225 6y ago>“What this represents is a cynical attempt at setting up what’s almost like a betting casino so some people can make money from others suffering,” Basav Sen, climate justice project director at the Institute for Policy Studies question that seems to have been neglected in this thread: how does the existence of a futures market over an asset affect the price of that asset? -'cause that's what the quote implies.
- sideshowb 6y agoWell I guess bubbles in water have been a thing since, like, forever...
- dyeje 6y agoMeanwhile Nestlé is pumping 1.1 million gallons of groundwater per day in Michigan for the cost of $200 a year. https://www.clickondetroit.com/consumer/2018/07/18/residents-outraged-by-new-water-deal-allowing-nestle-to-pump-millions-of-gallons-from-michigan/ https://www.clickondetroit.com/consumer/2018/07/18/residents...
- xyzzyz 6y agoMichigan is not lacking in water, and 1.1 million of gallons a day is pretty much a drop in a bucket. Like Michigan loses 10 000 times as much every day due to evaporation, for example.
- triangleman 6y agoStill they ought to pay their fair share
- ahepp 6y agoThey do pay their fair share. Anyone in the state of Michigan can stick a straw in the ground and start sucking out water. If they suck out a lot, they have to pay a couple hundred dollars for a permit. These rules are the same for farmers, industrial users (like car manufacturers), nestle, or you and me.
- dontbeevil1992 6y agoyou and me are not a multinational billion dollar for-profit corporation. we have different capabilities, incentives, and externalities to our behavior. nestle is taking advantage of the commons for massive profit, they should contribute back
- mr_woozy 6y ago>you and me are not a multinational billion dollar for-profit corporation. ahhhh my sweet summer child........
- darksaints 6y agoTwo things to note: 1) Water is a life necessity, but it can also be a superfluous want (e.g. lawns) and it can also be a greedy natural resource grab (e.g. Nestle). Generally speaking, we have enough water to go around for human needs, but people regularly use the emotional appeal of human needs to justify low prices for their wants or exploitation. At the very least, financial markets for water are devoid of shallow emotional appeals to morality and acknowledge it for what it is. All that I ask is that we always ensure that human needs are met, and that is a job for governments. Let financial markets work with the rest...hell, the government should probably sell what's left over to the highest bidders. 2) the real difficulty of selling water is infrastructure. It's expensive, and unlike most commodities, it is almost completely fixed-cost. And the vast vast hypermajority of water consumers only have a single feasible source of water producers. The idea of water futures, then, seems a little absurd. This essentially limits trading to only those who can feasibly take delivery, and in reality that limits you to the same single-source provider you've had from the very beginning. I can't help but think that auctions or dynamic pricing are a better and more efficient idea.
- eggsmediumrare 6y agoWater is also necessary for a healthy environment, so "sell what's left over to the highest bidders" could backfire in a really spectacular way.
- 8fhdkjw039hd 6y agoIf you do not put a price on something, it will be exploited more not less.
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- hikerclimber 6y agohopefully humanity dies soon. thats what I hope for.
- hikerclimber 6y agoalso hope that the pfizer vaccine doesn't get approval so we have more death.
- elevenoh 6y agoCanada gon get rich.
- alasdair_ 6y agoI see no problem with this, so long as the CME also allows futures contracts based on the chance of at least one CME board member being assassinated in a given month.
- vermilingua 6y agoIf you ever wonder if HN is in a bubble, remember that there are people in these comments actually arguing that access to water is not a human right.
- savanaly 6y agoHow does that make it a bubble? Evidently, you're here, as well as countless others arguing against it. The appearance of arguments you disagree with isn't evidence of a bubble but of a healthy discussion. A bubble would be if every single comment or near to it were espousing the same viewpoint.
- vermilingua 6y agoWhile that might be true, if you asked 100 people on the street if water is a human right, 99 would say yes. In nearly every comment thread here there is at least one unique poster saying no. Bubble may be the wrong word, but we certainly have many more people here that are far removed from the real world.
- savanaly 6y agoDefinitely true. It's just that "bubble" means something, and that isn't "something you disagree with" even if those two coincide in most usages ("wow, the [other tribe] are all in such a bubble because of the youtube algorithm!").
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- allemagne 6y agoFrom a lot of knee-jerk responses in this thread, one would think that Wall Street has just privatized water or now has the ability to raise prices or deny people water. No. Water is already bought and sold for money in California. Now a company allows for people to make bets on how those prices are expected to change. That's the development. Adjust your outrage accordingly. https://www.bloomberg.com/news/articles/2020-12-06/water-futures-to-start-trading-amid-growing-fears-of-scarcity?sref=oUjKJw8m https://www.bloomberg.com/news/articles/2020-12-06/water-fut...
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- skybrian 6y agoBesides which, this is about farmers buying water by the acre-foot, not residential drinking water. It's also about trade within a watershed or water system, because moving large amounts of water for farming in any other way isn't economical. Cities are always going to be able to outbid farmers, in some cases by buying farmland for the water rights. The worst-case result of that is that some farmers in dry areas go out of business and more food is imported. Food is a global market, water isn't. It's easier to import food than water since it's much lighter for the price.
- toomuchtodo 6y agoMany crops that are water intensive are exported. Almonds, for example. There’s no need to import food due to water shortages, only to prevent farmers from exporting our water by way of these (very profitable) water intensive exports. To your point, municipalities are most definitely going to need to buy out farmers to prevent water resource depletion. They should do so whenever market conditions value these rights at a discount (“buy low”). https://www.npr.org/sections/money/2015/07/22/425392169/episode-640-the-bottom-of-the-well https://www.npr.org/sections/money/2015/07/22/425392169/epis...
- malloryerik 6y ago> Food is a global market, water isn't. It's easier to import food than water since it's much lighter for the price. Exactly. These futures are a local market much closer to weather futures than fungible markets like crude oil or soybeans or even natural gas to a lesser degree, exactly because it's uneconomical to transport regular water over large distances. So these futures markets have little to tell us directly about anything other than local conditions in California. They allow local farmers to trade risk with other market participants such as speculators or the sellers of the water.
- phs318u 6y agoI wonder what the water market equivalent will be for Enron's infamous "burn baby, burn" moment? https://www.cbsnews.com/news/enron-traders-caught-on-tape/ https://www.cbsnews.com/news/enron-traders-caught-on-tape/
- ac42 6y agoTime to start praying (or do something about it). Artificial water shortages are already a thing it seems.
- bobxyz 6y agoThe peoples of the civilized nations of the world should seriously start thinking about hanging by the balls all this arrogant clique of mafia financiers who are sowing chaos. The day they are caught, I promise you neither forgetting nor forgiveness.
- bawana 6y agowater or cpus or gpus.....it's all the same....secondary markets only allow abuse, not 'fair access'
- VinLucero 6y agoI can’t find a place through a normal broker like Schwab or TD Ameritrade to trade these futures even though I’ve traded other commodities. Anyone know how to get access?