South America in the spotlight on grain market

The March wheat contract on the Matif closed marginally higher yesterday, up €0,75 to €186 per tonne. On the CBoT, wheat also closed higher, up 1 cents to $5.07¾ per bushel. Corn rose somewhat more strongly, rising 4 cents to $4.44½ per bushel. In contrast to grains, soybeans fell slightly, closing 6 cents lower at $10.52¼ per bushel.

The Mercosur deal between the EU and Argentina, Brazil, Paraguay, and Uruguay has been postponed by a month. European Commission President Ursula von der Leyen was scheduled to travel to South America on Saturday to finalize the free trade agreement between the EU and the four South American countries after 25 years of negotiations. The Mercosur agreement is causing considerable unrest in the European agricultural sector. European farmers fear unfair competition from Latin America.

The request for a postponement came from Italian Prime Minister Meloni, but France, Poland, and Hungary, among others, have also criticized the deal. France wants stricter safeguards, including clauses ensuring that Mercosur products comply with EU regulations on the use of pesticides and chlorine, and stricter food safety inspections. "It is inexplicable if vegetables, beef, and chicken chemically treated with products banned in France were to arrive on our territory," French government spokeswoman Maud Bregeon said during a press conference. Supporters of the agreement say it will not override existing EU food safety regulations.

controls
To address these concerns, the European Council and the European Parliament have determined that if import volumes increase by more than 8% or the price of a product falls by more than 8% in one or more EU member states compared to the three-year average under review, the Council and Parliament will take measures to implement controls (including in Mercosur countries) to reassure farmers' groups who insist that production standards, such as those for pesticides and animal health in Europe, are being met. The Mercosur agreement was one of the reasons for the large-scale farmers' protests in Brussels yesterday.

In South America, farmers seem more busy with the current growing season. Rain is forecast for northern Argentina and southern and central Brazil. This is good news for the soybeans and corn in the region. However, if it remains wet for the rest of this month, some sources warn that localized flooding could occur in Brazilian provinces.

In southern Argentina, after a wet and warm November, it's now on the dry side. According to the Argentine Ministry of Agriculture, 58% of the planned soybean acreage has been sown. Last year, this week, the figure was 66%. Argentine growers generally aim to finish sowing soybeans in December. When soybeans are sown as a follow-up crop to wheat, this is sometimes postponed until early January.

No snow
Drought combined with relatively mild weather is becoming a problem on the southern prairies of the US. Winter wheat there lacks a protective blanket of snow, and if it gets colder in January, wintering is imminent, warns LSEG. The latest USDA drought monitor shows that the drought is spreading, particularly in Oklahoma.