Inside: Dairy Market
Phosphate rights: supply is increasing, what is the price doing?
The supply of phosphate rights is increasing, but how does the price of options on phosphate rights respond to this? Subscribe to 'Milk & Feed Pro' to find out.
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Phosphate rights have fallen somewhat in value since the beginning of September. It is a turning point in the existence of phosphate rights. The price of production rights has risen sharply since the beginning of this year. This year, trading started at €100 and that price rose to an average of €215 per phosphate right at the beginning of September.
At the end of September, the price dropped to an average of €206,50 per right. This is evident from inquiries with various brokers and intermediaries. This price is used for transactions where there is no deductible for the buyer and part of the amount is paid in advance. If a deductible is charged, the purchase price will be lower.
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The price of phosphate rights is decreasing slightly for the first time in a long period.
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The reason for the decrease is the increasing supply. Dairy farmers who were already planning to close or scale down their business are now implementing this. They offer phosphate rights. The sharp increase in the price of phosphate rights may have persuaded them to enter the market. It is expected that more quitters will report to the market this autumn. Some of the options on phosphate rights are still hanging over the market.
While supply has increased, demand for phosphate rights is moderating. Dairy farmers have become more cautious due to the lawsuits surrounding the phosphate reduction plan. On October 31 the decision of the appeal is expected. It will then become clear how large the group is that does not have to participate in the phosphate reduction plan. It is expected that this ruling may also have consequences for the phosphate rights scheme.
Uncertainty
Another uncertainty that causes dairy farmers to be cautious is the persistent lack of clarity about the tax deductibility of phosphate rights.
A third point is the uncertainty about whether the derogation will be granted on time. Insight into this allocation is a condition for the introduction of the phosphate rights system. The phosphate rights can only be entered per calendar year.
Dairy farmers who purchase options on phosphate rights want to compensate at least the generic discount on their livestock with an 8,3% discount. This is a guideline for many dairy farmers who are already purchasing phosphate rights.