Why the EU-Mercosur deal angers French agribusiness

It also underscores statements from prominent executives like Olivier Leducq, CEO of Tereos—one of France’s largest cooperatives—who opposes the current terms, and Alexandre Bompard, global CEO of Carrefour, who has voiced concerns over Mercosur meat imports.

French agribusiness has struggled to maintain competitiveness, not only against producers outside the EU but also within the bloc, particularly compared to Poland and Romania.

Excluding beverages such as wine and champagne, France’s agri-food trade balance has been in deficit since 2014. The French National Institute of Statistics and Economic Studies (INSEE) reports that the meat sector, in particular, has posted a negative trade balance since 2000.

These deficits highlight an increasing reliance on imports within the EU common market. Since 2015, France has experienced a negative agricultural trade balance with other EU countries, even while maintaining a surplus with nations outside the bloc.

“The countries gaining ground in Europe are the newly integrated Eastern European nations with lower costs,” says Marcos Jank, coordinator of the Insper Agro Global Center. For example, in the corn trade, where France remains a net exporter, imports from Poland rose 22-fold between 2018 and 2022, while imports from Romania soared 63%.

Experts attribute this loss of competitiveness to France’s low-scale, regional agricultural model, which is subject to stringent regulations. In this context, the agricultural sector struggles to attract young talent. From 2010 to 2020, the number of family members working full-time on farms fell by 38%, according to INSEE.

As family succession diminishes, many farmers opt to sell their land to other producers, contributing to a slight increase in land concentration over the past decade. The average farm size in France grew from 55 hectares in 2010 to 69 hectares in 2020.

Still, this scale pales compared to farms in South America. In Brazil, the 2017 Agricultural Census recorded an average farm size of 69 hectares, but the reality is starkly polarized: 2,450 farms exceeding 10,000 hectares account for 15% of the country’s agricultural area, while over 600,000 properties smaller than 1 hectare collectively make up just 0.1% of Brazil’s rural land.

“In France, farms are predominantly small. You can’t be competitive without economies of scale,” says Mr. Jank. “Another factor is that in Brazil, we can achieve two to three harvests a year, whereas in France, there is only one.”

Stricter EU regulations on pesticides and veterinary products are also frequently cited as factors driving up production costs for French farmers.

The EU has already banned several substances still in use in Mercosur countries for environmental and health concerns. These include the insecticide chlorpyrifos, the herbicide glufosinate ammonium, and the antibiotics monensin and flavomycin, which enhance livestock performance.

Nevertheless, some French organizations inaccurately cite products banned in Brazil as still being in use. For instance, the Institute d’Elevage (IDELE), which focuses on livestock, claimed in a November report that Brazil continues to use bacitracin and virginiamycin as growth promoters, even though both were prohibited in 2018. Similarly, a 2022 INSEE report mentioned carbendazim and fipronil pesticides, though carbendazim was banned, and the primary use of fipronil was restricted that same year.

Despite the continued use of certain products in Mercosur that are prohibited in the EU, experts consulted by Valor believe this is not the primary driver of productivity differences. Europe, unlike tropical regions, does not contend with the same variety of pests.

In livestock farming, cost disparities are magnified by differing practices. While cattle in South America are often pasture-raised, French cattle are typically confined, requiring constant feed supplementation. “The cost of consistently providing feed is fundamentally different,” observes another source.

Data from international consultancy Agribenchmark highlights the stark contrast in production costs. Between 2018 and 2020, beef production costs in Mercosur were 40% lower than in Europe; in Brazil alone, the difference reached 60%. Within Europe, France’s fattening costs are notably higher than those of other countries, such as Germany.

The chart below shows which European countries imported the most beef from Brazil in containers throughout 2024. The data is derived from Datamar’s DataLiner.

European Beef Import Ranking | 2024 | TEUs

Source: DataLiner (click here to request a demo)

According to INSEE, one key factor enhancing the competitiveness of Brazil’s meat sector is the dominance of three major exporters—JBS, Minerva, and Marfrig—which allows them to “achieve significant economies of scale.” Additionally, the devaluation of Mercosur currencies “makes South American meat cheaper when it reaches France.”

Unsurprisingly, the French livestock sector has undergone significant restructuring and remains among the staunchest opponents of the EU-Mercosur agreement. Between 2010 and 2020, the number of French farms dedicated to livestock declined by 3.6%, representing two-thirds of the total reduction in farms nationwide. The impact on land use was mitigated only by consolidating farms into more extensive operations.

Despite its strengths, Brazil faces challenges in fully utilizing the Hilton quota—a preferential tariff allocation for premium beef cuts exported to the EU. For the current cycle running from July 1, 2024, to June 1, 2025, Brazil allocated 8,900 tonnes but had filled only 14% of this volume by November 1. “The difficulties [of exporting to Europe] are so great that exporters prefer to ship to Asia,” says Mr. Jank.

The EU-Mercosur agreement offers a reduced tariff quota for 100,000 tonnes of beef across the entire EU bloc. However, this does not eliminate tariffs; instead, it incrementally raises quotas, creating a ceiling for Mercosur exports. “Ultimately, this is a good deal for the French,” says Ambassador José Alfredo Graça Lima. He argues that Mercosur countries are failing to capitalize on opportunities in a growing European market.

The ambassador, who has served at the World Trade Organization (WTO) and was involved in the early stages of EU-Mercosur negotiations, suggests that French resistance goes beyond current economic challenges. “From the very first moment, in 1999, France has never been in favor. The European sector has always aligned with the Common Agricultural Policy, which is protectionist by design, aiming to maintain prices at certain levels.”

Source: Valor Internacional