Inside: Dairy Market
Watch out for the price of phosphate rights
The price of options on phosphate rights rose quite rapidly until week 32. Dairy farmers are now holding back until there is more clarity about the progress of the phosphate reduction plan and the introduction of phosphate rights in 2018.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
Everything the pronounciation of the judge on August 9, the trade in phosphate rights went very well. Transactions exceeding €200 per right have been reported. This concerns amounts up to €220, depending on the number of options and the payment terms. Most traders quote prices from €180 to €200 net. Phosphate rights have never been this high before this year.
The price of phosphate rights has increased by €8 in the past 100 months. In August, dairy farmers paid an average of €200 per right. At the beginning of this year that was still half.
Text continues below graph
The price of phosphate rights has doubled in the past 8 months. Source: Boerenbusiness
Insecure
The legal issues surrounding the phosphate reduction plan make dairy farmers who are looking for phosphate rights uncertain. The judge stated in the past period approximately 400 dairy farmers, who filed summary proceedings against the State, were in the right. They don't have to cull cows, provided they do a light touch of the Netherlands Enterprise Agency.
The phosphate reduction plan no longer applies to this group until there is clarity about the outcome the appeal. The ruling is expected on September 18.
Demand market
So far, the trade in phosphate rights has been a typical demand market. The dairy farmers who... generic discount of 8,3% as of January 1, are looking for phosphate rights options. And companies that want to stop can already record the rights granted later for sale. However, this only happens sparingly.
Stoppers wait quietly
The stoppers wait patiently in the hope that the price will rise even further. That expectation is realistic, because during the time of the milk quota the equivalent of €400 per right was paid.
Options trading
Physical trading in phosphate rights is not yet possible, because the rights do not yet exist. These are expected to be introduced on January 1, 2018. The trade in 2017 concerns options on phosphate rights and 1 right represents 1 kilo of dairy cattle phosphate.