3 ms·

From 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 peop

From 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...

deleted 6y ago
[deleted]
skybrian 6y ago
Besides 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 ago
  Many 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.
greencar 6y ago
No different from ski resorts trading snowfall futures
lamby 6y ago
> That's the development. Adjust your outrage accordingly. Maybe folks are outraged that water is being bought and sold to begin with, but this is the first time they are hearing about it?
norswap 6y ago
I also expect there's a lot of "oh no evil finance people profiteering out of water!", which is of course a gross misunderstanding of what futures are. Futures are useful if you're a farmer: it helps you precommit to a certain price of water to be paid in the future. You might pay more than you would if the price goes down, but also less than would if the prices goes up. It's basically insurance.
- joshocar 6y ago
  In other words, in volatile markets it creates predictability. Farmers use futures for selling their produce. If we didn't have futures farmers would have no way to plan for the next year until they sold everything at the end of the year, which is very impractical. Instead they lock in their revenue and upgrade, repair, buy or sell equipment based on that. Since water is now a volatile resource it makes sense to do the same with that and lock in part of their expenses.

deleted 6y ago

[deleted]

skybrian 6y ago

Besides 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 ago
Many 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.

greencar 6y ago

No different from ski resorts trading snowfall futures

lamby 6y ago

> That's the development. Adjust your outrage accordingly. Maybe folks are outraged that water is being bought and sold to begin with, but this is the first time they are hearing about it?

norswap 6y ago

I also expect there's a lot of "oh no evil finance people profiteering out of water!", which is of course a gross misunderstanding of what futures are. Futures are useful if you're a farmer: it helps you precommit to a certain price of water to be paid in the future. You might pay more than you would if the price goes down, but also less than would if the prices goes up. It's basically insurance.

joshocar 6y ago
In other words, in volatile markets it creates predictability. Farmers use futures for selling their produce. If we didn't have futures farmers would have no way to plan for the next year until they sold everything at the end of the year, which is very impractical. Instead they lock in their revenue and upgrade, repair, buy or sell equipment based on that. Since water is now a volatile resource it makes sense to do the same with that and lock in part of their expenses.