Despite criticism, no extra supervision of phosphate trade

The trade in phosphate rights has now been going on for almost 1,5 years, so the market is still young. Until now, dairy farmers have been critical of the functioning of the trade, according to a report by Ecorys, which was drawn up on behalf of the Ministry of Agriculture, Nature and Food Quality. However, it is too early for additional market surveillance.

Last year, in the House of Representatives a motion van Helma Lodders (VVD), with the request for an investigation into the trade in phosphate rights and its supervision. The Ministry of Agriculture, Nature and Food Quality called in research agency Ecorys for this, which assessed the functioning of trade on the basis of 3 criteria: transparency, liquidity and low entry and exit barriers.

Prices not transparent
When it comes to transparency, Ecorys concludes that there is a 'bilateral' market, in which supply and demand must find each other. It is not clear to a dairy farmer how many phosphate rights are available, or at what prices they are traded. Various market and information platforms (such as quotum.nu, phosphateplatorm.nl and phosphaterecht.nl) could provide an answer for this, but according to researchers these have insufficient scale and have not yet proven themselves.

The responses of dairy farmers were also collected in the study. They express their suspicion that the intermediaries are speculating with phosphate rights. In addition, according to these dairy farmers, the market is artificially influenced by traders and brokers. They would create scarcity in order to drive up prices. 

Rules unclear
The researchers also question the other 2 criteria. Liquidity in the market would be limited by the fact that trade is tied to the phosphate ceiling; a high demand cannot therefore be met by the supply of new market parties. Due to the mandatory creaming of transactions, it is unattractive on paper to sell or lease rights.

At the same time, this measure limits market speculation, the research bureau concludes. The researchers also say that the rules of the game were not entirely clear at the start of the legal system, given the many objections submitted by dairy farmers.

No extra supervision
Despite the critical comments, the group of researchers has not encountered any fundamental problems. "Therefore, the current market surveillance by the Netherlands Authority for Consumers and Markets (ACM) is sufficient in the start-up phase of trade", the conclusion reads. The researchers recommend that you first gain more experience with the current working method.  

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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