Industry beckons for nitrogen rights

The market for nitrogen rights appears to be starting cautiously. Judging by the noises from the market, the first buyers have reported sight. These mainly come from industry. Concrete transactions are not known so far, much is still unclear. What do the asking prices do?

Many companies interested in nitrogen rights mainly explore the market during this period. It is not easy either, in view of the regional limitations of the rights and the ambiguities that still exist. Since the first provinces made external netting possible in mid-September, major changes have not taken place in the ammonia and nitrogen rights market.

The update of the Aerius Calculator that took place on October 15 has also not made a big difference so far. Asking prices range from €40 to €100 per kilo of ammonia (net, after 30% creaming).

Aerius calculation price determining
Compared to the trade in animal and phosphate rights, the determination of the price remains much more difficult to interpret. This is the result of the necessary calculation with the Aerius Calculator. Calculating the tradable kilograms of ammonia is not that difficult. Although there is still discussion about the latent space in the permit. Agricultural interest groups demand the rights that have been granted, but have not (yet) actually been used. The government takes the actual stable capacity realized as a starting point.

The number of kilograms of ammonia is not decisive when determining the price. The reduction of nitrogen deposition on vulnerable Natura 2000 areas is decisive. The reduction resulting from the transaction of ammonia and nitrogen rights is crucial. This calculation is the work of consultancy firms. A simple online calculation tool is not available.

Government crucial
The government plays a crucial role in the trade in ammonia and nitrogen rights. When Minister Schouten announced in mid-October that he would partially exempt construction from nitrogen reduction, the lease market partially disappeared. This never actually got underway.

The province of Gelderland announced this week that it would allocate €20 million for the remediation of the veal farm, which is in distress due to the corona crisis. Nobody knows how much of an effect this has on the demand from the Gelderland industry. In any case, it is not yet clear which industry will be obliged to invest and how many kilograms of ammonia are needed in which regions close to Natura2000 areas.

Exact effect not yet known
Moreover, the national government will start this year with the voluntary buy-out of peak-loading livestock farms in the vicinity of Natura2000 areas. It concerns hundreds of millions of euros. Such amounts can have a major effect on the supply and demand of ammonia and nitrogen rights. However, the exact effect of this arrangement is not yet known.

At the same time, it is tempting for companies to speculate on sharply rising prices, comparable to the extreme price development of phosphate rights, since participation in the buy-out scheme for livestock farms is voluntary. On the other hand, agricultural interest groups continue to fight unabatedly against external netting and other questionable aspects of nitrogen legislation.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.