Why the price of phosphate rights is rising quickly

The price of phosphate rights rose sharply at the end of last week, after Minister Carola Schouten (Agriculture, Nature and Food Quality) provided some clarity about the elaboration of her policy. In answers to parliamentary questions, she announced that the skimmed rights will most likely only come on the market in 2019, so the supply will be tighter.

Dairy cooperative FrieslandCampina also increased the guaranteed price for July, while the prospects for the dairy market are not bad. This nevertheless persuades some dairy farmers to purchase additional allowances or seriously consider them. In addition to the trade that takes place, there is a lot of information in many places. 

Still need more rights
It is heard from the market that many dairy farmers these days are busy calculating nitrogen and phosphate production (mineral balance). Unexpectedly more phosphate is produced regularly than estimated. This is because the less productive dairy cows have often been cleaned up, which means that the average milk production is higher. The result is that phosphate excretion increases and dairy farmers sometimes have to buy rights to be able to milk through.

All in all, there is a lot of demand for phosphate rights, resulting in rapidly rising prices. A week ago, phosphate rights were still traded for €210 per right. This week, prices are as high as €235 per right, which has also seen the necessary volumes traded. However, from these levels onwards, buyers do become more cautious. This means that the stretch upwards seems to be gone in the short term.

Listing much higher
How the market will move in the coming weeks is a mystery to many. Hardly anyone dares to burn their fingers on a prognosis. This week, the DCA quotation for phosphate rights increases by €22 to €232,50 per right. Such a large price increase in 1 week has not been seen since trading officially started at the beginning of 2018.

Click here for a historical price trend.