|Read Historical Background|
After climbing over the last year, average prices of CBT units have settled at about $25,000/unit, where they sat during the second quarter of this year. The second quarter last year saw average prices around $22,000/unit, and the first quarter this year saw price exceed $25,000/unit. Transactions with higher volumes yielded higher prices.
The volume traded during the second quarter of 2015 eased. A total of 516 units changed hands during the quarter, with monthly volumes ranging from 73 units to 331 units. During the first quarter, a total of 665 units changed hands, and the second quarter last year saw transfers of 700 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 have tightened the market. 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.
Does the settling of price indicate that the market has reached and equilibrium? (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