Europe gives green light to Mercosur despite protests

After more than 25 years of negotiations, Europe has given the green light for the Mercosur trade agreement with South America. This has caused great discontent among farmers in, among others, France and Poland. Meanwhile, the grain market remains relatively flat. Cold and drought provide some support on one hand while buyers find the current level too high to enter the wheat market. The March contract for wheat on the Matif closed yesterday unchanged at €191.50 per tonne. Wheat also closed steady at $5.18 per bushel on the CBoT. Corn took a small step back, closing ¾ cent lower at $4.46 per bushel. Soybeans lost 5¾ cents to $10.47 per bushel. Buyers of wheat are leaning back a bit in the futures markets. The current prices are not really inviting to step in, some analysts suggest. The colder weather forecasted for Eastern Europe and the Black Sea region is increasing fears of winterkill slightly. According to the latest forecasts, temperatures are expected to drop a bit more than previously anticipated earlier this week. The cold is creating some sentiment, but analysts do not foresee large-scale winterkill of grains. In the US, it is not the cold but drought that is creating sentiment. 42% of the winter wheat area is experiencing drought compared to 40% last week and 24% this week last year. Yesterday, rain moved over the southern prairies of the US, but further, there is little to no rain expected. The market is also somewhat anticipating the Wasde report which will be published by the USDA on Monday evening Dutch time. Some analysts expect that the USDA will adjust the ending stocks of wheat slightly upwards. The demand for wheat in the world market is moderate, but US exporters seem to be less affected by this than their European counterparts. In the week ending January 1, 82.1% of the USDA's projected wheat exports for the 2025/26 season have been executed. The five-year average for this period stands at 75.5%. In the remaining part of the season, 127,000 tonnes need to be exported weekly to meet the total export for the current season. Mercosur In Europe, farmers are less concerned with exports but more with imports, you could say. French farmers drove with tractors through Paris in protest against the Mercosur trade agreement between the EU and a number of South American countries. Farmers in various European member states fear that Europe will be flooded with cheap agricultural products from South America, which are produced under more lenient regulations than in Europe. The protest has had little effect. This morning, a majority of the European member states voted in favor of the treaty. France, Poland, Ireland, Austria, and Hungary voted against, and Belgium abstained from voting. Because Italy has given up its resistance after promises from Brussels, there was a majority in favor of Mercosur. It is expected that the President of the European Commission, Ursula von der Leyen, will travel to South America next week to sign the treaty. However, it is not entirely a done deal for Von der Leyen. The European Parliament can still delay or block the implementation. Especially French MEPs could still make their voices heard in the coming period. French President Macron is entangled in a struggle with Le Pen for the favor of voters in rural France. The foundation under Macron's government is thin, and now that Europe has voted in favor of the treaty, this could lead to a motion of no confidence against the current French government, according to experts.