Nasdaq Veles California Water Index
As water allocations are slashed due to low supplies, what options do farmers have? California Farm Water Coalition executive director Mike Wade says thousands of acres are likely to go fallow, but better solutions are needed. One tool that has just been created this past year is the Nasdaq Veles California Water Index. But Wade says it’s still too early to tell if this is truly going to be effective in helping growers manage their risk.
Wade… “The Nasdaq Veles California Water Index is an attempt to provide some kind of profit motivation in participating in a water market. It does not trade any actual water. It's simply tracking an index, and allowing people to buy an index at a certain price and hopefully sell it later at a higher price. And their justification is the profit that you would make on your water purchase and sale would provide you some reasonable profit at the end of the year or in a subsequent year that you could use to spend on higher water costs if they do go up.”
Wade says it’s another potential tool in the toolbox, but whether or not this can start to offer real solutions remains to be seen.
Wade… “It's a hedging tool. There are ways that it could work, but it's too new yet to see if it's going to have any impact at all and provide a benefit for farmers in California.”
At the time of this report, the index is up over 60% in 2021.