Confusion in the European Coffee Market: Is Ethiopian Coffee Really a Risk?
Peter Horsten
Chief Growth Officer | Business Coach | Pragmatic Idealist Bridging Strategy and Sustainability to Drive Purposeful, Lasting Change
Despite reports of a stable demand for coffee in Europe, including projections of growth in 2024 by the International Coffee Organization, a puzzling trend has emerged in the European coffee market. Notably, there's a significant decline in the demand for Ethiopian coffee and a reluctance to sign new contracts for upcoming months, as confirmed by key market players.
This article explores the underlying reasons behind this trend, focusing on economic concerns and uncertainties surrounding compliance with the EU's Deforestation Regulation (EUDR).
EUDR's Impact on European Coffee Stocks
In recent months, the European coffee market has witnessed a substantial decline in stock levels, giving rise to a blend of economic and regulatory concerns.
Since its implementation on June 29, 2023, the EUDR has created ripples in the European coffee sector. Mandating proof that coffee is not sourced from deforested land after December 31, 2020, the regulation has imposed a significant compliance burden on operators and exporters. Understandably, this shift in the regulatory landscape has led to a sense of caution among industry stakeholders, contributing to a sharp 26.9% reduction in European coffee stocks from June to October 2023.
The Coffee Agricultural Cycle and Compliance
A pertinent point to consider is the status of smallholder coffee, particularly from countries like Ethiopia.
The coffee plant typically takes at least three years, but more likely 4 to 5 years to produce fruit. Considering the EU's deforestation cut-off date is December 31, 2020, it suggests that current coffee crops, including those from Ethiopia, are likely to be in compliance with the EUDR.
This point raises questions about why Ethiopian coffee is facing a decline in demand despite being seemingly safe from EUDR violations.
领英推荐
Economic Concerns and Legislative Uncertainties
The reluctance to engage with Ethiopian coffee seems to be driven by two main factors:
Economic Concerns: Issues like inflation and market fluctuations have made buyers cautious in the current climate.
Legislative Uncertainties: There is significant uncertainty about how the EUDR will be applied, particularly concerning coffees from smallholder farms like those in Ethiopia. This ambiguity is creating doubt in the market, even though, based on the coffee growth cycle, Ethiopian coffee should currently and even next year meet EUDR standards.
The Need for Clear Communication from the EU
The EU’s lack of clear communication regarding the status of smallholder farmers' coffee under the EUDR has further added to the market’s confusion. A clear and definitive statement from the EU confirming the compliance of current smallholder coffee stocks could alleviate doubts and help facilitate trade. The recent unclear messaging in the media, such as the article by the Financial Times titled 'Coffee and cocoa stored in EU warehouses at risk of destruction under new rules,' only intensifies this confusion.
Conclusion
The European coffee market finds itself in a puzzling situation. While the ICO predicts growth, Ethiopian coffee is witnessing a drop in demand due to economic worries and unclear legislative rules. To resolve this and ensure the sustainability of the coffee trade, especially for smallholder producers, the EU needs to provide clear and direct communication. Such transparency would help stabilise the market and ensure that consumers can continue to enjoy a diverse range of coffee flavours from the origin of coffee.
Please join the discussion and share your opinion or thoughts below. Do you know someone who might have the answer regarding the compliance? Please let me know.
Disclaimer: This article is based on research from reliable sources and incorporates personal opinions, which may require further validation.
References used:
Solving one problem at a time!
4 个月It's not that it is impossible to comply, even including traceability but it will cost more money to do so. money the producer will have to add on its prices and the European consumer will have to pay for it in the end! if the primary purpose of the EU is to protect the European consumer, I think they need to sit and weigh in the pros and cons of this regulation! This feels like one of those rules exclusively made by people in power who have never set foot in an African coffee farm!
microbiologist at M.B P.L.C family milk Ethiopia
8 个月I don`t think this will be an issue most Ethiopian coffee suppliers have been certified by Rainforest Alliance (RA) if there will be access to comply with this EUDR regulation locally most of them will happily accept it.