Inside: Dairy Market
There is still a lot of demand for phosphate rights
The demand for phosphate rights continues to increase. This is apparent from a call round along several traders. Sellers are holding onto their rights in the expectation that prices will rise further.
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A large proportion of dairy farmers will probably have to buy rights. This realization is dawning on more and more of them. The trade notices this mainly due to an increase in the number of applications. This continued unabated this week. Those who are active in the demand market are mainly non-land-based dairy farmers who will in any case have to purchase a number of rights in order not to keep significantly fewer cows in 2018.
This category often calls all traders in the hope of obtaining a number of kilos for an acceptable price. The bids for this are now €200 per phosphate right. One trader reports having concluded a few options contracts last week, all for €220 per phosphate right. That is more than €9.000 per cow.
Traders cautious
The various traders say they do not want to influence the market with predictions. They are therefore largely reluctant to share their market analysis publicly. The traders point out that there is still a lot of uncertainty surrounding the legislation on phosphate rights and therefore price formation. However, it is clear that they expect the price to rise further. This is partly due to the group of buyers that is already agitating, a group that wants to secure the purchase of rights 'at all costs'.
But much more so because a large group, estimated at approximately three-quarters of dairy farmers, will want to purchase a relatively small number of phosphate rights. Purely to supplement their discount from the phosphate reduction plan and the generic discount. This often concerns rights for 5 to 15 cows.
Push up price
It is also this large group that collectively drives up the price. Unconsciously and without wanting to, but that is the effect that occurs. Sellers also know that some buyers still have to become active and that is partly why they keep their cards in their pockets. Most traders expect this to change not in the short term, but in a few months. Sellers therefore know more specifically how many rights they have to trade.
If the price remains stable for a while, at a slightly higher level than now, the sellers are likely to move. After all, many of them will not want to make the mistake of waiting too long for price formation to turn around.