Import threat from South America deferred
The prospect of increased imports into the EU of high-value beef from Mercosur countries such as Brazil is the only cloud on their horizon. Coveney said: “Mercosur, the South American trade bloc of which Brazil and Argentina are the two largest members, is currently in ongoing negotiations with the European Union with a view to producing and selling more produce for export into the European Union with fewer restrictions, in return for which certain EU exports, predominantly financial services and manufactured products, will gain access to South American markets. For a whole series of reasons, any deal on Mercosur has been put off for the foreseeable future.”
Senior European officials had said a deal was unlikely ahead of next year’s French presidential election, scheduled for April and early May. A summit meeting of EU, Latin America and Caribbean countries in Chile in July, 2012 was seen as a realistic target date for agreement, or for a declaration on finalising an agreement within 2012.
There will be indications of possible time frames this week, from a meeting between EU and Mercosur negotiators in Uruguay — their last scheduled meeting until June, 2012.
Despite opposition from EU farmers, led by Austria, France, Germany, Ireland, and Italy, the eurozone crisis could encourage European negotiators to drop objections to Mercosur.
Brazil has a vast trade surplus that promises EU exporters a bonanza in a deal, and new sources of revenue at a time of great adversity for the EU. Brazil is also a possible source of funds for a multi-billion euro bailout — and Angela Merkel, Germany’s chancellor, has promised to push for a successful trade agreement. Farmers fear that a surge in cheap agricultural products from South America due to a trade agreement with Mercosur could cost EU agriculture €25bn; but the European Commission puts the potential cost at €3bn.
MERCOSUR trade talks which threaten to spoil the party for EU cattle farmers seem to put on the long finger. But the beef price trend in South America which helped push EU cattle prices to their current high levels now seems to be reversing.
In 2010, beef prices rose sharply in the large producing regions in the southern hemisphere, increasing upward pressure on prices in Europe, and contributing to the stronger EU trade of 2011.
A major factor in this year’s strong EU trade was cattle and beef prices in Brazil and Argentina almost reaching par with EU prices in the autumn of last year — an unprecedented situation, which compared with a 150c/kg price gap between the EU and Brazil as recently as 2008.
Brazilian prices peaked at 290c/kg last autumn, but have since eased back. By late September, at 248c, Brazilian R3 steer prices had fallen to 120c below equivalent prices in the EU. Two weeks ago, due to appreciation of the Brazilian real against the euro, the gap narrowed to 110c. Regardless of the flood of imports feared in a trade deal between the EU and Mercosur countries, weakening South American prices could be reflected in the EU cattle market.
