Reuters reported that in anticipation of a new EU regulation that forbids the selling of products connected to deforestation, a primary cause of climate change, coffee importers to the EU are cutting back on their purchases from small farmers in Africa and other places.
Industry insiders claim that the upcoming EU Deforestation Regulation (EUDR), which is set to go into effect in late 2024, is already having unforeseen effects that could change the structure of the world’s commodities markets.
A decrease in coffee orders from Ethiopia in recent months has reportedly been recorded by multiple sources, impacting almost 5 million rural communities who depend on the crop.
These shifts in sourcing strategies ahead of the law’s implementation risk exacerbating poverty among small-scale farmers, raising prices for EU consumers, and potentially undermining the EUDR’s effectiveness in forest conservation.
Johannes Dengler, an executive at German roaster Dallmayr, expressed concerns about purchasing significant quantities of Ethiopian coffee in the future, citing the need for compliance with the EUDR even before the finalization of implementing acts for the law.
Under the EUDR, importers dealing with commodities like coffee, cocoa, soy, palm, cattle, timber, and rubber, along with products using these materials, must demonstrate that their goods did not originate from deforested areas or face substantial fines.
Major coffee player JDE Peets mentioned the possibility of excluding smaller producing countries from its supply chain as early as March if solutions aren’t implemented by that date.
Deforestation, identified as the second leading cause of climate change, has prompted the European Commission to allocate 70 million euros ($76 million) at COP28 to support producing countries and smallholders in complying with the EUDR.
The EUDR mandates digital mapping of supply chains down to the specific plot where raw materials are grown, posing challenges in developing countries with patchy internet coverage and issues like land rights disputes.
Some companies may redirect raw materials from major commodity-producing countries to non-EU markets to implement the EUDR, potentially reducing its impact on forest conservation.
Despite potential challenges and increased compliance costs, the European Commission contends that the EUDR is not expected to drive food inflation.
However, concerns persist regarding its impact on major cocoa-producing countries like Ivory Coast, where half of the crop is sold by local intermediaries, making traceability difficult.
Balancing the regulation’s objectives with the livelihoods of communities in protected forests remains a complex issue, with calls for collaborative solutions to address social and environmental concerns
