EUDR drives exporters, importers to rush negotiations

The looming implementation of the European Union Deforestation Regulation (EUDR) and the uncertainties surrounding its enforcement have led to a surge in the early trading of agricultural commodities, such as coffee and beef. This rush may tighten port logistics by the end of the year.

The law, set to take effect on December 30, will require European importers to provide proof to local authorities that shipments of soy, coffee, beef, cocoa, rubber, and timber arriving in the region have not been sourced from areas deforested after 2020. However, details on how this verification process will be implemented remain unclear. The law, aimed at curbing the destruction of tropical forests, faces growing international opposition, including from Brazil, which has requested the EU not to enforce the measure.

In August, beef exports saw a significant spike compared to both the same month in 2023 and the previous month. Year-over-year exports rose by 28.5%, while month-over-month figures increased by 27.7%.

Industry insiders believe that importers are trying to accelerate purchases to avoid complications once the new law is in place. Reflecting on August’s export performance, Jorge Camardelli, president of the Brazilian Association of Meat Exporting Industries (ABIEC), wrote in a statement that the “imminence” of the new rules had fueled demand from importers.

One key concern among exporters is whether beef from cattle raised on land deforested after 2020, but slaughtered this year, will be allowed into the EU after December 30. While large companies have traceability systems in place, many smaller exporters do not.

The chart below uses DataLiner data to compare Brazilian beef shipments every month from January 2021 to July 2024.

Beef Exports | Jan-Jul 2021 to Jan – Jul 2024 | TEUs

Source: DataLiner (click here to request a demo)

Coffee

In the coffee sector, exports for the July-August period, marking the beginning of the 2024/25 harvest, reached 7.5 million bags, an 11% increase compared to 2023, according to the Brazilian Coffee Exporters Council (CECAFE). While the new environmental regulations have played a role in speeding up trade, they are not the only factor.

“The regulation has indeed boosted Brazil’s exports. Many exporters told us they were trying to expedite shipments ahead of the new law,” said Eduardo Heron, technical director at CECAFE. He added that the rising demand for Conilon coffee was also driven by a shortfall in production from Vietnam, the leading supplier in Asia.

Of the 7.5 million bags exported during the period, just over 1.8 million were Conilon—a 51% increase. In addition to Vietnam’s production decline, attacks by Houthi forces on vessels in the Red Sea have also disrupted the flow of Southeast Asian coffee.

A Conilon producer from Espírito Santo, who spoke under the condition of anonymity, said they aim to “clear shipments” for export before December 30, despite more attractive domestic prices, and focus on selling to national industries and traders afterward.

Between January and August, Conilon exports from Espírito Santo rose by 131.1% year-over-year, while beef exports surged by 96.7%, according to the state’s agriculture department.

The rush to export coffee isn’t limited to Brazil. Ethiopia, the world’s fifth-largest coffee producer, is also pushing to ship more over the next three months ahead of the new law’s implementation, according to traders.

Mr. Heron pointed out that the early shipments are already causing congestion at ports, exacerbating logistical pressures due to Houthi activity in the Red Sea. Ships rerouting via the southern tip of Africa are experiencing delays of 10 to 12 days, raising the risk that goods shipped as early as December 1 may not arrive before the new law takes effect.

To mitigate this risk, some European importers are already requiring exporters to commit to compliance with the law, said Sueme Mori, international relations director at the Brazilian Agriculture Confederation (CNA). “We’re seeing cases where compliance clauses are included in contracts or where exporters are already being asked to provide geo-referencing data,” she noted, even though it’s still unclear how the EU will enforce the rule.

When contacted, the Port of Rotterdam in the Netherlands, the largest in the EU, said it was too early to draw any conclusions based on current ship queues for agricultural products. “However, we’ve heard of increased demand for storage space in the fourth quarter of this year,” the port said in a statement. “That could indicate that companies are preparing for the regulation, but it is too soon to make definitive conclusions.”

The Port of Antwerp-Bruges in Belgium reported that it had no knowledge of ship queues at the moment and did not expect an increase due to the EUDR. The Port of Hamburg was also contacted but did not respond.

According to the Belgian port, the only control expected upon a ship’s arrival will be the importers’ submission of the reference number from their due diligence declaration on import documents. The content of the due diligence will be reviewed later.

CECAFE President Marcos Matos noted that another challenge is likely to be the technological infrastructure needed to assess due diligence reports. Calls for flexibility in the law are growing, including from the governments of Germany and Italy, as well as from European private-sector groups.

On Wednesday (26), 28 associations published a letter calling for a postponement of the regulation’s implementation. According to the groups, companies in the bloc “are facing paralyzing uncertainties when negotiating contracts for the coming year.”

“The actions of European nations reflect concerns about the potential inflationary impact in the EU, which could result from product shortages if port delays occur or if exporters choose other partners,” said Fábio Zanin, a lawyer specializing in agribusiness.

Brazil’s secretary of international relations at the Ministry of Agriculture, Roberto Perosa, believes that, unless EUDR implementation is postponed, there will be a reallocation of sales to other countries and regions.

EU representatives in Brazil declined to comment. Valor reached out to six commissioners from EU countries, but they did not respond.

Source: Valor Internacional

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