The criticism from Lavazza boss Giuseppe Lavazza comes on top of already-raised prices due to the affects of drought on coffee harvest and the ongoing Red Sea crisis which has hit coffee deliveries to Europe.
A cup of coffee could soon become much more expensive due to new coffee production and deforestation rules, according to the chairman of Lavazza, Giuseppe Lavazza.
The EU’s recently implemented deforestation rules could mean that thousands of farmers’ coffee bean exports to the EU could soon be rejected, due to them having been produced on land that was recently deforested.
Although the EU’s deforestation rules are seen to have good intentions, aimed at preserving forest quality and reducing the impact of deforestation on local communities, several industry leaders fear that they may have been badly drafted and almost impossible to implement in some cases.
Under the new rules, coffee manufacturers across the world will have to use satellite coordinates to digitally map how big their farm is and clearly highlight its boundaries, in order to check whether any of the land has recently been deforested.
However, for several farmers in key coffee-producing and developing nations, such as Brazil, Vietnam, Indonesia and Colombia, this would be close to impossible, due to the funds and technical expertise required to satellite mapping.
In a conversation with journalists during the Wimbledon tennis tournament and reported in the Telegraph, Lavazza said the upshot for business would be “terrible”.
The coffee boss added: “This is introducing a big limitation, a very strong distortion of the market.
“For all of the European roasters, this is very challenging. Think about farmers in Central America, I think very few of them are ready to be compliant with the regulation.”
Farm borders in many of the countries are blurred and have been for generations, resulting in farmers not knowing the full extent of their farms exactly, and thus, unable to provide the information needed for satellite mapping.
The EU’s new regulations are also likely to create additional regulatory burden on coffee importers in the bloc, who will now have to conduct extensive checks on their export partners, such as independent audits and risk assessments.
This is likely to add to costs and time involved, which could also mean a lot of EU coffee roasters contemplating leaving the bloc and setting up facilities elsewhere, such as China or the US, constraining coffee supplies even more.
Coffee prices have also been rising recently due to natural factors, such as droughts, as well as geopolitical factors such as the Red Sea crisis adding considerably to shipping times and supply chain backlogs.
Sahra Nguyen, founder of Nguyen Coffee Supply, a specialised Vietnamese coffee roaster and importer, said, as reported by Perfect Daily Grind: “There are many factors impacting the price increase of robusta, including drought-related shortages which will drive the price up with demand. Additionally, climate-related shortages of arabica will also drive demand for robusta up as roasters will need to diversify their offerings.
“Moreover, there’s the nature of trading on the Intercontinental Exchange (ICE) which will impact the price due to supply and demand dynamics. If a company anticipates continued shortages, they may secure inventory earlier, which can also drive up the price.”
What is the EU deforestation rule?
According to the European Commission, “On 29 June 2023, the regulation on deforestation-free products entered into force. The main driver of these processes is the expansion of agricultural land that is linked to the production of commodities like cattle, wood, cocoa, soy, palm oil, coffee, rubber and some of their derived products, such as leather, chocolate, tyres or furniture.
ADVERTISEMENT“As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem and it wants to lead the way to solving it.
“Under the regulation, any operator or trader who places these commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation.”
These rules also aim to decrease the EU’s carbon emissions triggered by the bloc’s production and consumption of these commodities.
The European Commission insists the changes will not pose too much of a regulatory or cost burden to farmers.
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