Coffee Conundrum
The coffee industry is bracing itself for a potential crisis as EU deforestation rules come into effect, threatening to drive up prices and disrupt global supply chains. The new regulations, aimed at preserving forest quality and reducing deforestation’s impact on local communities, have sparked widespread concern among industry leaders.
A Brewing Storm
Giuseppe Lavazza, chairman of Lavazza, has described the rules as “terrible” and warned that they will introduce a “big limitation” and “very strong distortion of the market”. The rules require coffee manufacturers to digitally map their farms using satellite coordinates to prove that no deforestation has occurred. This is a significant challenge for many farmers, particularly in developing countries where farm borders are often blurred and technical expertise is limited.
Global Impact
The EU’s regulations will not only affect European roasters but also coffee importers in the bloc, who will need to conduct extensive checks on their export partners. This will add to costs and time, potentially leading to a decline in EU coffee roasters setting up facilities elsewhere. The price of coffee is already rising due to natural factors such as droughts and geopolitical factors like the Red Sea crisis.
Experts Weigh In
Sahra Nguyen, founder of Nguyen Coffee Supply, believes that a combination of factors is driving up coffee prices, including drought-related shortages and climate-related shortages of arabica. She warns that demand for robusta will increase as roasters diversify their offerings, further driving up prices.
What’s Behind the Rules?
The EU’s deforestation rules aim to reduce the bloc’s carbon emissions triggered by its production and consumption of commodities linked to deforestation and forest degradation. The regulation requires operators and traders to prove that products do not originate from recently deforested land or contribute to forest degradation. While the intention behind the rules is good, critics argue that they may be poorly drafted and almost impossible to implement in some cases.
SOURCE: Ref Image from Financial Times
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