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CME, Nasdaq to Launch Water Futures Contract

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Re: CME, Nasdaq to Launch Water Futures Contract

#41

Post by paledot »

ghshephard wrote: post #33

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/m^3 or $554/acre foot, which is roughly where the spot market right now is for water. I wouldn't gave guessed they would be that close, but it bodes very well for inexpensive en…

I don't think this is a coincidence. Salt water, after all, is present in effectively unlimited quantities in many of the world's major cities. If the price of desalination drops, competition (in an imaginary world) will drive down the price of desalinated water in lockstep with it.

Interestingly, there is a theoretical floor to the amount of energy invested per unit of water desalinated, and we're apparently quite close to it. From here, our best hopes for improvement are to use waste heat or solar thermal energy to desalinate water.

Re: CME, Nasdaq to Launch Water Futures Contract

#42

Post by octoberfranklin »

fred_is_fred wrote: post #6
jonahbenton wrote: post #2

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

Water has been financialized for years in the western US. Developers buy and sell water rights from farmers, farmers own farms where they don't grow crops because the water is going to condos. Water rights are bought and sold and traded all the time.

Or the farmers grow alfalfa once every five years simply to avoid losing their water rights.

Re: CME, Nasdaq to Launch Water Futures Contract

#43

Post by octoberfranklin »

H8crilA wrote: post #21

Anybody has read the CME contract specs in detail? One thing I don't understand is how can you trade a commodity that's all about transportation costs. In some parts of the world water is literally free, you only have to pay for the connection. Whereas in others there'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…

> One thing I don't understand is how can you trade a commodity that's all about transportation costs.

It's a big hoax, like all cash-settled futures.

Wall Street doesn't mind that.

Re: CME, Nasdaq to Launch Water Futures Contract

#44

Post by octoberfranklin »

tumblerz wrote: post #30
H8crilA wrote: post #21

Anybody has read the CME contract specs in detail? One thing I don't understand is how can you trade a commodity that's all about transportation costs. In some parts of the world water is literally free, you only have to pay for the connection. Whereas in others there'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…

Typically, one transports the water within another product. Alfalfa, for example: https://www.theguardian.com/us-news/2019/mar/25/california-w...

That only works if you have unlimited amounts of unused fertile soil at the transport origin.

Western Washington has a massive excess of water but can't use this technique to "send it" anywhere... the clay-heavy soil isn't much good for industrial-scale crop production (aside from trees of course).

Re: CME, Nasdaq to Launch Water Futures Contract

#45

Post by octoberfranklin »

bluedevil2k wrote: post #11

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.

Actually in many Western states (Oregon for one) it is illegal to capture and store rainwater. There is one narrow and very recent exception for capture using the roof of a permitted dwelling, but if you build a pond or a lake or any kind of structure for rainwater collection purposes you are in fact breaking the law.

Water rights are bonkers-crazy.

Re: CME, Nasdaq to Launch Water Futures Contract

#46

Post by h2o_enron »

dnautics wrote: post #37
h2o_enron wrote: post #29

Earlier quoted context omitted.

I share the same concerns. Market economics did not prevent e.g. Enron from scalping millions of dollars out of CA energy markets while rolling blackouts resulted in powerless hospitals. Speculation - not actual supply or demand - in oil markets drove the price of gasoline from $1 to $4 a gallon (and now back to $2). Everyone else paid for the inefficient market finding a false equilibrium pumped up by perception of…

> Markets have thus far failed to solve for long-term environmental damage: That's really not true in general. Market theory has been crucial in creating more sustainable resource usage in the US northeast fisheries, and the highly successful SOX and NOX emissions markets (acid rain really isn't an existential threat any longer). The US seems to be incapable of forming a sane CO2 market because of the rights intransi…

Climate change is real. Markets are not solving for that.

(Subsidies and market theory.)

Hopefully we can utilize market economics to incentivize sustainable development and head off currently accelerating environmental destruction with costs unrecoverable in a human lifetime. Markets absolutely have not solved for global warming. Take a look around: the arctic is burning; CA is burning; the severity, frequency, and costs of weather disasters are significantly increasing.

https://news.ycombinator.com/item?id=20925127

It is denial or delusion to claim that markets have solved or will solve for long-term environmental and thus economic sustainability.

Some firms - despite the current EPA's denialism, suppression, and appeasements of special interests - have chosen to forego short-term profits in order to achieve (voluntary) Paris Agreement targets. Unfortunately, markets are hardly reinforcing that good decision. Long-term ROI is beyond the attention spans of retail and institutional investors.

Unregulated free markets have resulted in smog-filled cities and polluted drinking water in very many economies.

Europe has had carbon credits for quite awhile. That's a good first step, but it's clearly not sufficient.

There could be yearly tokens for carbon, greenhouse gases, and toxic waste (e.g. the wastewater from washing out coal plants that the current administration has decided to allow to be dumped in our rivers). Speculators and do-gooders could drive up the prices of said tokens.

Is the market choosing the most energy-efficient cryptoasset when there's virtually zero switching cost and plenty of substitute assets? No. That market, at least, is choosing the least energy-efficient alternative; and it appears that nothing but a pan-industry "you can only waste renewable energy on that speculative margin" could be expected to result in capital allocation with long-term environmental security as a rational primary objective.

Re: CME, Nasdaq to Launch Water Futures Contract

#47

Post by h2o_enron »

h2o_enron wrote: post #46
dnautics wrote: post #37

Earlier quoted context omitted.

> Markets have thus far failed to solve for long-term environmental damage: That's really not true in general. Market theory has been crucial in creating more sustainable resource usage in the US northeast fisheries, and the highly successful SOX and NOX emissions markets (acid rain really isn't an existential threat any longer). The US seems to be incapable of forming a sane CO2 market because of the rights intransi…

Climate change is real. Markets are not solving for that. (Subsidies and market theory.) Hopefully we can utilize market economics to incentivize sustainable development and head off currently accelerating environmental destruction with costs unrecoverable in a human lifetime. Markets absolutely have not solved for global warming. Take a look around: the arctic is burning; CA is burning; the severity, frequency, and…

Firm A: wildly profitable, stock price through the roof, dumping waste at zero cost

Firm B: profitable, blue chip, 100% green, files (e.g. GRI) Corporate Sustainability Reports

Which investors are factoring in the most important long-term factors in portfolio development? Markets are not optimizing for sustainability: policy is necessary to counterbalance profit motive.

Are we just using markets wrong?

Nobody likes penalties more than incentives.

Re: CME, Nasdaq to Launch Water Futures Contract

#48

Post by calvinmorrison »

fred_is_fred wrote: post #39
calvinmorrison wrote: post #8

Earlier quoted context omitted.

Water rights have been finacialized for thousands of years. Qanats, which are underground sort of canals ( https://en.wikipedia.org/wiki/Qanat ) were built in Persia to distribute water to agriculture and incentivized by government "It was an Achaemenid ruling that in case someone succeeded in constructing a qanat and bringing groundwater to the surface in order to cultivate land, or in renovating an abandoned qanat,…

Thanks. I love hearing bits of interesting history like that. I'd never heard of Qanats.

It's a good scrabble word

Re: CME, Nasdaq to Launch Water Futures Contract

#49

Post by jelliclesfarm »

wmf wrote: post #19
jonahbenton wrote: post #2

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

The previous situation where almond farmers got unlimited water for free and some cities couldn't get enough water at any price was worse.

Important to note that CA almonds are mostly grown for global export. This ties in with GDP.

Re: CME, Nasdaq to Launch Water Futures Contract

#50

Post by jelliclesfarm »

Next up: Trade in water is trade in grain, corn, dairy, meat.

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

That is..2 lbs or baked bread is 1000 gallons of water.

You are wearing 650 gallons of water if you were wearing a cotton shirt.

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)

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