Searching for buyers in the nitrogen rights market

The purchase of kilograms of ammonia has now been made possible by the provinces of Zeeland, Noord-Brabant, Limburg and Overijssel, but (potential) buyers are not yet concerned. Partly because of this, the price cannot yet be compared with that of phosphate rights per cow. 

Despite the farmers' protest against, among other things, the sale of production rights in livestock farming, a group of quitters is stirring. They count themselves rich with the newly created trade. This group would like to see prices that are comparable to the price of phosphate rights. 

After all, agricultural land is also bought for the top prize for windmills and solar parks. Many people give in to the generous returns that this can bring. Now livestock farmers in the vicinity of Natura 2000 areas are given the opportunity to hit a financial blow, or so the reasoning goes. 

Kilo's offer pretty clear
But it is far from that yet. A handful of providers of nitrogen (ammonia) rights can now be found on the Internet. Added together, their offer yields an average asking price of €75 per kilo net (30% creaming for nature conservation has been settled). 

This is only an indication, because the location of the company offering rights for sale in relation to a Natura 2000 site in particular determines the value of the rights. However, the providers do not state that information. At most, a postal code or place is mentioned. The exact value of the rights only becomes clear after using the Aerius calculator. For that reason, the province of Overijssel is waiting to make transactions possible until the update of the Aerius model is ready in October. 

There are also traders and brokers in nitrogen (ammonia) rights who do not yet state prices due to the great uncertainty and are careful to make the transactions final. Although the supply side of the market is becoming increasingly clear, there is still a great deal of uncertainty about the demand side. There is not much demand from livestock farming itself. 

When announcing the decision that they allow external netting, the province of Overijssel stated that it feared not so much an empty sale by parties outside the agricultural sector, but mainly saw demand from the livestock sector itself. Development of these companies, without increasing the total provincial nitrogen emissions, is only possible if external netting is made possible, says the province of Overijssel. It is of course also possible that there are provincial differences in supply and demand, for example because of the livestock density per hectare. 

A lot of uncertainty about the demand side
In general, traders agree with the picture that the province of Noord-Brabant has painted of the nitrogen rights market. There is much more supply than demand. One of the explanations for this is the complicated licensing of external netting, which can change during the process. This is also recognized by the province of North Brabant. 

In addition, Rabobank declared its opposition to external netting last week. The fact that the country's largest lender in the agricultural sector takes this position does not help trade, of course. The role that the bank plays in the trade of production rights is not new.

Another important factor that determines the development of demand is the demand from industry, (air) traffic, housing and infrastructure. However, there is still a lot of uncertainty about this. There is also the question of whether the so-called PAS detectors might have to go on the market after all, if the government proves unable to find another solution for the companies that assumed that a report would suffice when expanding their business. At least 3.000 livestock farms saw their licenses destroyed by the judge's ruling on the PAS, in May 2019. 

Lease risk
The province of Gelderland is the only province to date that does not allow purchase and sale, because this province is not yet confident that the livestock farming sector will be 'purchased out'. But (far) lease is already possible in the province of Gelderland. However, this can lead to a (definitive) lower reference situation for companies that supply nitrogen rights, if there is no Nature Conservation Act permit, but only notification has been made within the framework of the Activities Decree.

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