Phosphate rights price not so low since July

De DCA listing phosphate rights stands at €5 per phosphate right in week 181,50. That is €8,50 less than last week. The range within which transactions will be closed this week is €178,25 to €184,50.

(Text continues below chart)The price of phosphate rights has shown a sharp decline.

Demand less due to fraud
Since the Ministry of Agriculture, Nature and Food Quality (LNV) announced last week that there may be large-scale fraud has occurred with the registration of calves, demand has subsided. Dairy farmers take into account that Brussels will therefore decide not to allow the Netherlands to derogation to grant.

If this is really the case, it will the phosphate rights price will continue to decline. This is because livestock farmers then have to dispose of more manure. This may also have consequences for land ties. These additional costs will reduce the demand for phosphate rights, because dairy farmers will then have different costs.

Falling milk price
Another factor that makes dairy farmers reluctant is the falling milk price. FrieslandCampina announced Monday January 29 that the guaranteed price for February will decrease by €1,75 per 100 kilos. Although this decrease is smaller than expected, it makes dairy farmers more cautious on the phosphate rights market. 

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A third reason is Rabobank's strict repayment requirements. This week it was announced that Rabobank is sticking to a 5-year repayment term for the phosphate rights.

Supply drops in a declining market
At the same time, supply is decreasing due to falling prices. Sellers want at least $185 per right. Intermediaries report that the erratic phosphate rights market now appears to have settled somewhat and is moving between €175 and €190 per right. If the price drops too far, sellers will withdraw. However, if the price rises too fast, buyers will leave the market.