THE FACT that the Brazilian ambassador to the UK responded to criticism in The SF of standards in the beef industry was interesting. His quotation that 'importing from Brazil is importing innovation' underlines the massive strength of the Brazilian economy, although it is suffering the fallout from Covid.

His response confirmed that Brazil is taking seriously the criticism – fair or unfair – levelled at its beef industry. The deal it wants above all others – the Mercosur trade deal with the EU – will not happen until Brazil can demonstrate it is responding to criticism around the environment, hygiene practices and social welfare conditions in its industry.

This coincided with reports in Brussels that in a bid to break a 20-year impasse in finalising a trade deal with the Mercosur countries, legal instruments are being considered. Mercosur goes beyond Brazil to include Argentina, Uruguay, and Paraguay, with Venezuela suspended since 2016, but the deal is stalled by European concerns about Brazil. It has now been suggested that to get around these problems, goals with legal commitments attached would be set. These are targeted at Brazil. The hope on both sides is that this will reassure EU member states blocking a deal that has to be unanimous to come into force.

This will disappoint the farming lobby. It has always opposed Mercosur because of concerns around beef imports, but it should overcome the rainforest related environmental concerns holding up the deal. This could finally see a deal in place by the end of this year. Ironically, while the UK is making much, in terms of talk if not action, about post-Brexit freedom to make trade deals, it is likely to seize on the EU legal instrument as the basis for a trade deal with Brazil. This would help head off inevitable environmental criticism.

It seems strange that EU market forecasts now cover only 27 member states and exclude the UK. However they remain a good guide to prospects in agriculture, especially the short term forecasts. The longer term predictions are less relevant because the UK and EU are now on diverging rather than parallel roads in agriculture.

Even in the short term there are issues around the impact of Brexit. It is having little impact on EU production and exports to the UK, but across most major commodities red tape has decimated UK food exports to the EU-27. The government claims this is a temporary problem – a claim it will have to prove when it delivers export figures for the first quarter of 2021. But the anecdotal evidence still points to businesses struggling in the face of unworkable export rules, which the free trade agreement was supposed to avoid. This all goes back to the decision by Boris Johnson to prioritise sovereignty over market access and the interests of UK businesses.

The report says EU agriculture fared well through the 2020 lockdowns, thanks to improved home demand. But it also underlines the price being paid by key parts of the industry for the closure of hotels, restaurants and almost all tourism. On cereals it says prices are robust on the back of strong global conditions. EU production is forecast to rise by 5%, but prices will be protected by strong global demand for animal feeds in particular.

It is now six years since milk quotas ended, but after a brief surge market forces have held EU production in reasonable balance. The forecast for this year is a production increase of around 1%. This will come from better productivity, as cow numbers continue to decline. The biggest outlet for extra milk production will remain cheese and the Commission says this, and butter, will gain from a return of the food service sector, when lockdown restrictions ease.

On meat the news is less positive. Poultry production and demand has continued its steady growth, but the report is again gloomy when it comes to beef. It says this has been hit harder than other sectors by the loss of demand from the food service sector. It says sales fell by 1.2% in 2020 and will fall by a similar amount this year, even if catering demand recovers in the autumn.

For pigmeat, it says the boom days for exports, driven by African Swine Fever in China, have levelled off as domestic production recovers. This, expects Brussels, will see EU pig production fall slightly this year.