Mercosur and beef prices: what will happen?

The Mercosur trade deal announced on Friday evening won’t have any impact on beef price in Ireland or the rest of the EU in the short term.

The threat from the deal is very much in the medium and longer term because if it is approved, the EU has put in place a €1bn fund to cover market consequences of imports.

Long approval process

The Mercosur deal is no threat to the beef price next week or even next year because it faces a long approval process which will take at least a couple of years – and that is assuming that all of the EU27 member states (as it will be post-Brexit) approve the deal.

Before it goes for member state approval, it has to clear the EU institutions and that process will only begin after the legal scrubbing or administration, which will last several months, takes place.

The big debate

Within the EU institutions, the European Commission has to persuade the European Parliament with its newly-elected Green party MEPs that it is reasonable to call for planting of trees in the EU while at the same time encouraging the importation of beef from a country that is wiping out forest and savanna vegetation on an industrial scale.

That too will be a tough call for the Irish Government and the Taoiseach when the decision comes before a future meeting of the EU Council of Ministers, the third arm of EU administration alongside the Parliament and Commission.

Type of beef important

The effect of a 99,000t beef quota that will take five years to fully come into effect after the deal is approved in the EU will only become apparent when we have detail of what conditions are attached.

If there are no conditions and the 99,000t can be filled with steak meat, either fresh or frozen, then it would have a severe impact on the value of EU cattle.

This is because there is a relatively small amount of steak meat on each animal, meaning that to fill 99,000t would require at least 3.5m cattle – almost twice the Irish annual kill.

Long way to go

The bottom line is that today we have an announcement of what the EU and Mercosur would like to achieve in relation to a trade deal.

The process to give it legal effect will take years and the next Trade Commissioner has quite a job on their hands to persuade countries most affected in a negative way to ratify it.

The process to give it legal effect will take years

The focus now moves from Brussels to the Dáil in the case of Ireland, but while there are plenty of pressures on beef price recently, today’s announcement on Mercosur won’t add to the pain in the immediate future.

Meat Industry Ireland has said that the volume of additional low-priced South American beef on the EU market will be damaging.

A spokesman told the Irish Farmers Journal: "If the Commission is serious about 'carefully managed quotas', then it needs to ensure that all this beef is not allowed to be supplied as steak cuts.

"A fresh/frozen quota split will not achieve this. The gains for the wider EU economy, at the expense of our domestic beef sector, need to be compensated."

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