You Can Make Money in the Water Business, Lux Research Says

How to make money on water

Soft commodities How to profit from the world's water crisis Ever-increasing demand from food production, combined with global warming, is creating a water crisis. How to make money on water where there's a problem, there are companies searching for a solution - and that means exciting new profit opportunities for smart investors.

Four children die each minute from illness caused by a lack of drinking water. That's the equivalent of 30 fully loaded Boeing s crashing every day far more than are killed by Aids and malaria combined.

Yet the world is not running out of water. In fact, there is exactly the same amount of water as there was a million years ago. The problem is the soaring world population, the runaway urban sprawl and the rocketing cost of food production. The levels of waste are phenomenal.

Investing in water: the virtual water trade

That's because it takes between 2, and 5, litres of water to grow one kilogram of rice, 11, litres to grow the how to make money on water for enough cow for a quarter-pound hamburger, 50 cups of water for a teaspoon of sugar and litres of water to produce just one cup of coffee. In the s, the planet's population was predicted to double in a generation and there were fears that there would simply not be enough food to feed the world.

The result was the green revolution' a new generation of high-yielding crop varieties such as rice, wheat and maize. The world today grows twice as much food as it did then but uses three times as much water to grow it. Two-thirds of all the water taken from the environment goes to irrigate crops.

Across the world, millions of small farmers are drawing water from underground to irrigate their crops. India, China and Pakistan pump out around cubic kilometres of underground water each year, according to Tushaar Shah of the International Water Management Institute, a worldwide research network funded by the World Bank.

Seven ways of turning water into money - MarketWatch

Sri Lanka, Indonesia, Iran and Bangladesh are following suit. Even the US is emptying its underground reserves to grow grain and beef for export. Investing in water: the virtual water trade And the over-use of water doesn't just apply to food production.

Every T-shirt you wear will take 25 bathtubs of water to produce. Every quick and urgent earnings car useslitres.

how to make money on water

If what you symbols on trading platforms or drive is imported, you in the West are helping to empty rivers across the world. Water used for growing food and making products is called "virtual water". Every tonne of wheat arriving at a dockside carries with it, in virtual form, the 1, tonnes of water needed to grow it, explains Pearce. The global virtual-water trade is estimated at around a thousand cubic kilometres a year, or 20 river Niles.

Two-thirds is in crops, a quarter in meat and dairy products, and just a tenth in industrial products. The biggest net exporter of virtual water is the US, which exports in grain and beef around a third of all the water it takes from the environment; Canada, Australia, Argentina and Thailand are all net exporters too.

Some importers of virtual water, like Japan and the EU, are not short of water but for others, including Iran, Egypt and Algeria, it is vital, explains Tony Allan of the School of Oriental and African Studies in London, who invented the term virtual water'. Global warming means that the UK has not escaped the worldwide drought phenomenon.

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London's long-term average rainfall has now dropped below that of Istanbul, Dallas and Nairobi, points out Juliette Jowit in The Options method. The Government is considering proposals to introduce drought orders banning non-essential' use of water. Australia is suffering severe droughts, exacerbated by the El Nio effect. India's water table is at an all-time low and dropping fast; in some areas, it has fallen from 20 to feet below ground level in the last decade.

China is suffering from annual droughts, with Peking besieged by sand storms blowing down from the ever-expanding Gobi Desert. Southwestern America is struggling to find enough water for its growing population.

California and Nevada are being particularly hard hit. Rivers are running dry across the world, from the Rio Grande in Texas to India and Northern Nigeria, and the Aral Sea in central Asia, where a thriving fishing industry died as the sea was drained to feed the cotton farms, and where now the population is being poisoned by dust storms of salt.

Governments who concentrate on building yet more dams and draining subterranean aquifers need to look for other solutions, according to Pearce. We could grow crops with a quarter of the amount currently used, he told MoneyWeek.

how to make money on water

Most people don't pay an economic price for water because Government subsidies keep prices artificially low. Water engineers have "an obsession with building dams, laying pipes and pouring concrete. They want to supply ever more water and they are deaf to calls for investment in demand management This supply-side fixation is creating a global hydrological crisis".

Investing in water: supplying the solutions But where there is a problem, there must be a solution. And where there is a solution, there must be the opportunity for profit.

how to make money on water

So where can investors make profits from an industry that is the third-largest in the world? The solution lies in investing in solving the problems caused by decades of over-use and mismanagement of water. In summary, there's a supply problem so prices will rise. There will be more privatisation.

You Can Make Money in the Water Business, Lux Research Says

Municipal utility operators often do not have the resources to maintain the water systems up to regulatory standards. Climate change will mean more extreme weather conditions and more water in the sea. Alternatives, such as desalinisation, are set for sustained growth. Southern Spain's Andalucia, one of Europe's most arid regions, is also the continent's most productive agricultural area.

There's no need to guess which water-related company will perform best.

Intensive irrigation has seriously depleted resources. Now the city of Almeria collects and recycles all of its water, using it for agriculture. And the newly created Programa Agua will supply desalinisation facilities all along the Mediterranean coast.

This is an alternative that has long been considered too expensive. But that state of affairs is changing, says Dr Stuart Downward, lecturer in geography and environmental science at Kingston University and a specialist in water resources. The traditional players have been in the Middle East, such as Dubai, and island communities.

Malta and the Canaries have been using desalination for four to five decades because it's been their only source of water.


Big cities are beginning to take it seriously. Perth has given the go-ahead for a big desalination plant. There will be new investments in water supply and other infrastructure projects.

China, in particular, has water supplies that are very badly managed. Now China is trying to solve its problems, charging consumers and companies for water consumption, and allowing foreign companies.

how to make money on water

There are countries that have an over-abundance of water and here there are opportunities for sale to other countries. Canada, for example, has the same amount of water as China, but just 2. Brazil has far less need of its water than many of its neighbours.

Top performers exploit water shortages — both in California and elsewhere

As the value of water rises, countries like these will start to export their spare reserves to those more in need and willing to pay. Pipelines will spring up, connecting states and countries. Tankers will transport water across the sea as often as they do oil.

Water will be on the move. And how to make money on water who can transfer it will be there to benefit. Already, Turkey exports water to Israel and Cyprus in large balloons that can hold up to five million gallons of water. Companies in Scandinavia are investigating the ways in which they can profit from their watery landscapes, such as one company that intends to ship the equivalent of 1, Olympic swimming pools of water to Iran every day.

This company is not listed. But there are still plenty of opportunities for investors.

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The profits will come from companies that help nations improve the water that they already have. Right now, many of these firms are small companies that most analysts, let alone the public at large, have never heard of. But some of them will soon be giants.

how to make money on water

Investing in water: the best water stocks to buy To profit from the world's shortage of water, you might think that water utilities are an obvious way in. But companies such as Thames Water are highly regulated and have infrastructure up to years old.

There are better ways to profit from the "looming crisis," says Derek Moorhouse in the Fleet Street Letter. Not only has this diversified engineer "identified water as a key long-term growth market," but it has delivered an increased dividend every year for the last 26 years.

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Pico spotted a potential gap in the market and started buying up water rights in Nevada and Arizona. Though it's not a pure water play, it has been "consistently profitable," says Rick Rule of Global Resource Investments.

Water Investments: How to Invest in Water

The region is already suffering from water shortages, which are getting worse. That gives private water rights "a huge premium," says Rule. By holding a substantial number of water rights, Pico "is turning water into money. It is the largest farm owner in California and with its farmland comes one of the area's largest aquifers, or underground lakes.

The Tulare Lake is now a cotton field. But underneath there is still lots of water an estimatedto 2, acre feet the amount that would cover one acre a foot deep a year that could be drawn up without damaging the environment. At the lowest estimate, that's enough water to serviceCalifornian families every year.

The company is also building 50, homes. Boswell is a family owned company, but it has shareholders who trade on the OTC market. It is highly illiquid, but if you want to buy the stock, Rick Rule says: "Give me a call.

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They invested in the company "partly as a water play, but also because it's a great company. It already has massive plants all over the Middle East and is constantly winning new projects.

Alongside its desalination plants it also builds power plants so as our energy needs grow, it gets a second kick. Small stocks are higher risk than their bigger counterparts and investors ought to investigate them thoroughly before handing over their cash.