Background food production
Food issues in the spotlight: commotion in South America
Exploding pork prices in China. Record high onion prices in India. Disruptive bushfires in Australia. They are all events that result in volatile food prices. Boerenbusiness outlines (in the period around Christmas and New Year) the food issues on the different continents in a series of articles. In this article, the continent of South America is discussed.
South America has had a turbulent year. Some countries benefited from the Chinese meat shortage, the Mercosur deal was pushed through after 20 years of negotiations with the European Union, drought keeps the grain market under its spell and there was also unrest around the onions. Just a selection of many events.
Chinese meat crisis
A striking event surrounding the Chinese meat crisis is the trade agreement that China has concluded with Argentina. At first, this does not seem like special news, as China is struggling with a significant meat shortage. Until we take a closer look at Argentina's pork exports. 'Every little bit helps', the Chinese government must have thought. Argentine exports are not really helping. In 2018, the country shipped just 4.000 tons. A pittance on the Chinese requirement of 2,2 million tons.
Brazil also benefits from the Chinese meat demand. China has opened its doors to Brazilian offal. 2019 was therefore a good year for Brazilian meat exports. The demand for meat was high. The country dominates in poultry meat exports and pork exports are also doing well. In August, it was assumed that the export of poultry meat could grow by 5% and the export of pork could count on a growth of 12%. A trade agreement between China and Brazil would therefore have been more obvious.
Mercosur deal
The Mercosur deal also caused quite a stir. Mercosur is a name for the countries Brazil, Argentina, Uruguay and Paraguay. The trade agreement is therefore an enormous damper for the European agricultural sector. This treaty gives the Mercosur countries the opportunity to export a large amount of meat to Europe. For example, 180.000 tons of poultry meat may be exported to the EU.
This is a threat to the Dutch poultry sector, among others. For years they have made great efforts in the field of animal welfare, food safety and sustainability, to meet all requirements. And now, after 20 years of negotiations, the trade agreement threatens to import meat from countries with less strict rules than European agricultural laws and regulations.
The trade agreement brought about so much that even the Party for the Animals jumped into the breach for the Dutch agricultural sector. Although Germany is a strong supporter of Mercosur because of, among other things, car exports, it may still take some time before the treaty officially enters into force. Only at the end of this year will the European Commission be able to present the treaty to the Council of Ministers and then to the European Parliament. And then all individual EU member states still have to ratify the treaty.
Grain and onions
The South American grain market was mainly dominated by drought last year. Argentina is a country where double cultivation takes place: in December most of the wheat is threshed, after which soy is sown between the wheat stubble, for example. However, the drought makes this second sowing almost impossible. The wheat harvest has already started. It is estimated that the harvest is 300.000 tons lower than hoped. The prices, however, remain relatively low, because the volume is still large.
However, onion prices are heading in the other direction. Due to a disappointing domestic harvest, local prices rose to record levels in August. Due to the shortage, Brazil knocked on the door of the Dutch onion market as a buyer earlier than in previous years.
Jorine Cosse
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