Blog: Should water be traded as a commodity?
In times of drought, California’s Central Valley is full of farmers hindered by the lack of water. And this region, where the bulk of the nation’s fruits and vegetables are cultivated, is driving up the demand for water. Although many farmers without easy access to water often buy and pump it in from their neighbors, droughts often fuel massive price increases. And this often makes water so cost-prohibitive that it can discourage farmers from even planting crops. This predicament led a firm to recently list water as the newest commodity on the Chicago Mercantile Exchange. Now, water futures are traded daily. This helps farmers lock in a price for water, so they have a cushion if a drought threatens their crop revenues.