Interview Francis Evers
'Phosphate trade stands or falls with milk price'
Production rights broker Frans Evers from Zelhem in Gelderland has had busy months, during which the telephone was often red hot. According to Evers, the milk price is the most price-determining factor in the phosphate rights trade. "As long as money is being made in dairy farming, there will be a demand for phosphate rights."
The price of phosphate rights has risen sharply in recent weeks. How do you explain this price increase?
"That's very simple, the market does its job. In other words: there is more demand than supply, which means that prices are picking up. There are also reasons why there is demand; 1 of these is the milk price. Although the milk price has fallen since the end of 2017, money is still being made in dairy farming. A base price of €35 per 100 kilos is still an excellent milk price. There are also signs that the milk price has reached a bottom and may pick up in the coming months. This makes dairy farmers eager to milking and thus orientate on phosphate rights."
Is there a lot of speculation in the market?
"No. I have no reason to believe that there are currently large unsold volumes above the market, which sellers have withdrawn (from a speculative point of view) in view of possible price increases."
The trade has now officially started for almost half a year. How do you look back on this period and what can you say about the buying and selling strategy that dairy farmers use?
"Many dairy farmers buy their phosphate rights spread over several moments in the year. This is also the strategy that I recommend from a price-risk management perspective. If you wait until the last minute, you are speculating; this applies to both copper and seller. For some time there have been noises that many dairy farmers would stop, with the necessary supply becoming available as a result. This is also the noise that banks and accountants have made. However, the scenario outlined has turned out differently, given the prices that are improving Most dairy farmers have now mastered the ins and outs of the system. Most have a good idea and know how many kilos of phosphate still need to be purchased."
Do you see parallels with the trade in the former milk quota and other production rights?
"That is difficult to say. Converted, the milk quota has been traded for twice what phosphate rights now cost. However, the world of today is different from roughly 10 years ago. Dairy farmers have been given obligations regarding manure processing. The discovery of a comparable seasonal pattern also does not hold. The closing day for phosphate rights is on New Year's Eve, while the closing day of the milk quota always took place in the first quarter. It is quite possible that the necessary trade is taking place, but that remains to be seen. In any case, it is much too early to discover a possible seasonal pattern in the phosphate rights trade, as the market is still much too young for that."
"I don't see parallels with other production rights either. I've been hearing people say lately that pig rights also traded above €200 per right in the first year after launch and now only yield €60 per right. That's true. However, these people forget to mention that a few years ago poultry rights were trading at €5 per right and are now trading above €20 per right. Every market chooses its way, which means that the comparison of production rights is flawed. determines the price."
How do you look forward to trading in the coming months?
"It is difficult to express expectations out loud, purely because the market is so difficult to gauge. It is not (yet) possible to refer to previous years. I dare say that trade stands or falls with the level of the milk price. When money is earned in dairy farming, there are fewer quitters and more potential growers. It is difficult to estimate how many buyers will register in the coming months. It is possible that half of those who have already bought will report again. However "That is a very rough estimate. We can only draw up the final balance on December 31. Before that, it remains a guess."
What is the competition like between the various brokers and brokers, and what role does the internet play in trade?
"There is enough competition to keep each other on our toes. As for the influence of the internet, it gives some form of price direction, but not much more than that. The offer on the internet only indicates the trend. It is always a good idea to refer the prices on the internet with their respective broker or commission agent."
Wouter Job
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