|Read Historical Background|
Average prices of CBT units continue to climb and now exceed $25,000/unit. In the first quarter last year price were around $19,500/unit, and the fourth quarter saw prices between $24,500/unit and $25,000/unit. During the quarter, average prices ranged from $25,000/unit to $25,590/unit, with an auction reported in February revealing a willingness among buyers to pay as much as $26,635/unit. The winning bids for the auction brought prices of $26,250/unit and $26,635/unit.
The volume traded during the first quarter was up, driven heavily by two large transactions in January. A total of 665 units changed hands during the quarter, with monthly volumes ranging from 43 units to 515 units. During the fourth quarter 2014, 159 units changed hands, and the first quarter last year saw transfers of only 156 units.
Each unit represents 1/310,000 of the project’s supply—but the quantity of water represented by the unit varies each year according the annual quota set by the Northern Water board of directors. The annual quota has a historic average of 74% (0.74 AF/unit). For 2015, the initial quota, announced on April 10, is 70%.
Local water brokers continue to maintain that development and a shift in the demographics of who owns CBT units are the primary drivers in the price run-up. Past drought conditions and uncertainty over water supplies may also be playing a role. When the CBT project began operating in 1957, 85% of the units were owned by agricultural water users. Now agricultural users own only about 1/3 of the units. In addition, there are now fewer and larger agricultural operations—so the supply is limited to stronger hands that generally do not sell, except for estate settlements and retirement.
If the local water brokers are right, then expect to see the market tighten and prices continue to rise. (For more extensive background on the history of the CBT Project, see “Trading Federal Project Water: The Colorado–Big Thompson Project,” WS, October 1990).
Written by Marta L. Weismann