Despite protests: Europe gives Mercosur green light

The March wheat contract on the Matif closed unchanged yesterday at €191,50 per tonne. Wheat also closed flat on the CBoT at $5.18 per bushel. Corn took a small step back, closing 0.5 cents lower at $4.46 per bushel. Soybeans fell 0.5 cents to $10.47 per bushel.

Wheat buyers are leaning back a bit on the futures markets. Current prices don't exactly encourage buying, say some analysts. The colder weather forecast for Eastern Europe and the Black Sea region is, however, increasing fears of a wintering-out of grains. According to the latest forecasts, the mercury is expected to drop slightly further than anticipated earlier this week. The cold is somewhat encouraging, but analysts don't anticipate large-scale wintering-out of grains.

In the US, it's not the cold, but drought that's creating a mood. 42% of the winter wheat area is experiencing drought, compared to 40% last week and 24% this week last year. Yesterday, rain moved across the southern US prairies, but otherwise, little to no rain is expected.

The market is also anticipating the Wasde report, which will be published by the USDA on Monday evening (Dutch time). Some analysts expect the USDA to revise the closing wheat stocks slightly upward. Global wheat demand is subdued, but US exporters appear to be less affected by this than their European counterparts. In the week ending January 1st, 82,1% of the USDA's estimated wheat exports for the 2025/26 season were exported. The five-year average for the period is 75,5%. For the remainder of the season, 127.000 tons per week must be exported to meet total exports for the current season.

Mercosur
In Europe, farmers are less concerned with exports and more with imports, one could argue. French farmers drove tractors through Paris in protest against the Mercosur trade agreement between the EU and several South American countries. Farmers in several European member states fear that the trade agreement will flood Europe with cheap agricultural products from South America, produced under more lenient regulations than in Europe.

The protests, however, had little effect. This morning, the European member states voted overwhelmingly in favor of the treaty. France, Poland, Ireland, Austria, and Hungary voted against, and Belgium abstained. Because Italy abandoned its opposition after receiving assurances from Brussels, there was a majority in favor of Mercosur. European Commission President Ursula von der Leyen is expected to travel to South America next week to sign the treaty.

Still, Von der Leyen's race isn't entirely over yet. The European Parliament could still delay or block the implementation. French MEPs, in particular, could become active in the coming period. French President Macron is locked in a battle with Le Pen for the favor of rural voters. The support base of Macron's government is thin, and now that Europe has voted in favor of the treaty, experts say it could lead to a vote of no confidence in the current French government in the French parliament.