Coffee Firms Turning Away From Africa as EU Deforestation Law Looms

Importers of coffee to the European Union are scaling back purchases from small farmers in Africa and beyond as they prepare for a landmark EU law that will ban the sale of goods linked to the destruction of forests, a cause of climate change. Industry sources have said the cost and difficulty of complying with the EU Deforestation Regulation (EUDR), which comes into force late in 2024, meant it was already having unintended impacts that could in time reshape global commodities markets. Four cited a drying-up of orders in recent months for coffee from Ethiopia, where some 5 million farming families rely on the crop. They warned that sourcing strategies being adopted by companies in advance of the law risk increasing small scale farmer poverty and raising prices for EU consumers, while also undermining the EUDR’s impact on forest conservation.

Under EUDR, importers of commodities like coffee, cocoa, soy, palm, cattle, timber, and rubber – and products that use them – must be able to prove their goods did not originate from deforested land, or face hefty fines. Coffee major JDE Peets might be forced to exclude some smaller producing countries from its supply chain as early as March if it hasn’t “found and implemented a solution with them” by that date.

Deforestation is the second leading cause of climate change after burning of fossil fuels. The European Commission has several initiatives to help producing countries and smallholders comply with the EUDR, including one launched at COP28 where the EU and member states pledged 70 million euros ($76 million) to that end. Some smallholders see the EUDR as an opportunity, especially if accompanied by EU support measures, as it will help them meet growing global demand for sustainably sourced products.

The EUDR requires companies to digitally map their supply chains down to the plot where the raw materials were grown, which could potentially involve tracing millions of small farms in remote regions. In some developing countries, patchy internet coverage makes mapping difficult, while traders and industry experts say land rights disputes, weak law enforcement, and clan conflict can make it dangerous to even seek data on farm ownership.

Segregated supply chains will be required to implement the EUDR, and compliance costs throughout the supply chain are expected to raise food prices in the 27-country EU. Two of the world’s largest coffee traders, Sucafina and Louis Dreyfus Company (LDC), have already locked in future sales contracts that include an EUDR premium.

The European Commission said the EUDR is not expected to drive food inflation, but traceability has a cost, which will likely be offset as the law should reduce the number of intermediaries in the market.

Read More @ Reuters

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