Flood of Cheap Food and Loss of Competitiveness

Farmers are justifiably concerned about a flood of cheaper food products, including meat, grain, and dairy. Agricultural production in Mercosur countries, particularly regarding environmental and quality standards, is not as rigorous, enabling cost reductions. In contrast, European farmers must adhere to high environmental protection standards, making their production more expensive. Combined with the lack of effective protective mechanisms against imports, this could lead to reduced income for European farmers.

Farmers’ Protests: Agreement Revision Needed

In response to the threats, farmers across Europe, including Poland, have begun organizing protests. Their goal is to pressure governments into renegotiating the terms of the agreement to ensure fair competition in the market. Without additional protective regulations, European farmers may be forced to scale back production, negatively impacting not only their incomes but also the food security of the entire EU.

Summary: Protecting Agriculture in the EU Is Key

In conclusion, the agreement with Mercosur could pose a serious threat to agriculture in Europe. The lack of effective mechanisms to protect farmers from cheaper products from South America puts the future of many farms in doubt. EU producers will be unable to compete with lower prices resulting from the lack of strict standards in Mercosur countries. Therefore, if appropriate regulations are not introduced, many European farms may disappear from the market. The agreement, negotiated on December 6, 2024, by Ursula von der Leyen (during her visit to Uruguay), seems to contradict the change in approach previously presented by the European Commission. It is certain that European agriculture (especially Polish and French) faces a trial period. We will keep you updated on further developments in this matter.

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The post Mercosur: A Threat to Farmers in Europe first appeared on Harvium.

Undoubtedly, one of the reasons for this sharp increase is adverse weather conditions. They have affected the harvests in Russia and Ukraine. In April, wheat futures prices on the exchange rose by 12%, marking the largest monthly jump since February 2022. In the latter part of the article, we will present a detailed analysis of the causes of this increase and forecasts for the future.

The reasons

1. Russia and Ukraine – losses caused by weather conditions and projected losses

April brought hope for good wheat harvests for Ukrainian farmers. However, May turned out to be one of the driest months in the region’s history, dashing these expectations. In Ukraine, which along with Russia accounts for nearly one-third of the world’s wheat exports, drought and unexpected frosts destroyed a significant portion of the crops.

As a result, forecasts indicate that Ukrainian wheat harvests will amount to 19.1 million tons, the lowest level in over a decade. In Russia, early frosts in May destroyed hundreds of thousands of hectares of crops, and analysts have lowered production forecasts by more than 10%.

Analysis by the Harvium team – satellite projection

Our team analyzed satellite data covering the wheat-growing area in southern Russia :-). Data from a representative winter wheat field in the Rostov region, which was most affected by frosts in early May 2024, show a significant decline in crop condition. Losses exceed 50% in the studied area.

Additionally, this situation did not improve at the beginning of June. This is shown in the maps and NDVI index graph below, which serves as a proxy for chlorophyll content and crop condition. In some fields, irreversible die-off of wheat shoots is visible. This may prompt local farmers to reseed with other crops on the most damaged fields to minimize losses this season. So far, such operations have not been observed.

Undoubtedly, an interesting temporal correlation can be observed between the occurrence of severe frosts in the wheat-growing region of southern Russia and the rise in prices in the following weeks. This is shown in the graph below.

2. Situation in other parts of the World

The increase in wheat prices has also been influenced by the situation in other parts of the world. Australia is struggling with drought, and India is likely to become a net importer of wheat.

Forecast by the U.S. Department of Agriculture

As a result, the US Department of Agriculture forecasts in its report that global wheat stocks will reach their lowest level in nine years, which may lead to further price increases in global markets.

3. Weather conditions

Weather forecasts predict improved conditions for western and central Ukraine and western Russia, which may limit further losses. However, in southern Russia, the lack of rainfall could exacerbate losses and lead to even lower wheat yields.

Conclusion

In summary, the sudden weather changes in Russia and Ukraine, as well as the challenging situation in other wheat-producing regions, have led to an increase in wheat prices on global markets. This situation has driven up wheat prices on global markets. Forecasts indicate possible stabilization in some regions, but overall prospects for global harvests remain uncertain. To obtain information about prices of various products and commodities, check the quotations and contact Harvium.

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