Analysis Milk
Volatile phosphate market faces slight doubts
The phosphate rights market remains volatile. Prices remain high, as demand continues to exceed supply, but doubts are growing in the market. This is partly due to the sharp drop in milk prices and perhaps also concerns about the fate of phosphate rights in the new year.
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In recent weeks, prices have skyrocketed, strangely enough without much complaint. Anyone who wanted to buy went along. It was seen as normal market forces.
Many farms have seen substantial production, and the resulting increase in manure production needs to be addressed. Those who could, at least, purchased additional phosphate to stay out of trouble. Many buyers were well aware that there weren't enough rights on the market for everyone. Therefore, the motto was: get what you can!
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This sentiment has now shifted somewhat. The milk price is still reasonably good, and many companies have a decent amount in their accounts, but the milk price is falling rapidly, and what will happen next? Doubt is mounting. Moreover, it's quite possible that a general discount will be implemented next year.
It's not certain that the phosphate price will continue to fall in the coming weeks. The market is too speculative for that, and traders know there are still buyers demanding substantial quantities. The question is, however, why so much must be paid for extra rights and whether there isn't an alternative business strategy.
The DCA phosphate rights price will fall this week by €12,50 to €215 per right.