Photo Credit: Nairametrics 

Coffee importers in the European Union are scaling back purchases from small farmers in Africa and other regions in anticipation of a groundbreaking EU law prohibiting the sale of goods linked to deforestation, a significant contributor to climate change, as reported by Reuters.

The EU Deforestation Regulation (EUDR), slated to take effect in late 2024, is already causing unintended consequences that may reshape global commodities markets, according to industry sources.

Orders for coffee from Ethiopia have declined in recent months, impacting approximately 5 million farming families reliant 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.

Credit: Nairametrics