The Race to Map the World and Protect $110 Billion of Trade

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The European Union Deforestation Regulation (EUDR) is a new law aimed at tackling climate change and halting biodiversity loss, threatening far-reaching consequences for over $110 billion of trade annually, economies across six continents, and suppliers struggling to get to grips with Europe’s drive to be greener. By the end of the year, large companies handling seven key commodities — coffee, cocoa, soy, palm oil, cattle, rubber, and wood — and products derived from them will be required to prove that people in their supply chains didn’t work land that was deforested after 2020, legally or illegally. This means that every coffee bean, carcass of beef, log of wood, along with such things as chocolate, tires, and books — will need to be traced to the exact locations they came from, or the EU will levy hefty penalties. There are more than 55 countries that each export on average at least $100 million a year of goods to the EU that will be affected by EUDR. The impact will depend on the commodities they ship, who buys them and whether there are resources to handle farm mapping and all the necessary paperwork.

The task is magnified in the world of coffee, which is less associated with deforestation than palm oil, cattle, or soy, and is more reliant on millions of smallholder growers scattered across dozens of countries. Many lack the means to show they can comply with the law.

The European Union (EU) is implementing a new regulation aimed at reducing deforestation and promoting sustainable agriculture. The EUDR, which covers the import of EU-covered commodities, has been met with opposition from countries, including Indonesia, which is the world’s top producer of palm oil and a major contributor to deforestation. The EU is committed to addressing concerns and ensuring the successful rollout of EUDR, with a €70 million ($76 million) fund to support smallholders in partner countries. However, the EUDR has faced backlash from industry groups such as coffee roasters, parquet-floor makers, printers, and farmers. Countries like Australia have asked for a delay until the requirements are understood better. Traders have blamed the EUDR for adding to the surge in cocoa prices and warned of a potential shortage in Europe. The EUDR has also caused tensions in the less-developed world, with some countries blaming it for the rise in cocoa prices. Some EU member states have expressed concerns that their farmers and companies haven’t had enough time to prepare. Companies, governments, and farmer cooperatives are working to geolocate farms around the world to prove that they haven’t been involved in deforestation and comply with local laws.

Indonesia has over 1 million coffee farmers and exports significant quantities of five of seven commodities covered by the EU’s new law. In Ngarip, Indonesia, coffee farmer Wiyono has his land of decades-old coffee trees surveyed by Meridia Land BV. The mapping process takes about 20 minutes and involves collecting coordinates using a GPS pole and a tablet app, which form boundaries or polygons. EU officials say that presenting the exact locations of farms can be easily done with a phone, and for smallholders, this is not a significant ask.

Technology company Meridia maps the land of a client’s suppliers, collecting coordinates using a GPS pole and a tablet app, which then form the boundaries, or a polygon. The grower’s claim to the farm boundaries needs to be verified with the neighbors. Meridia’s agents also gather information from the farmer about crop harvests, fertilizer use, and personal details like debt and education.

Meridia’s work involves verifying existing data taken and submitted by their clients, and the farm plot coordinates are fed into specialized mapping software to be tested for quality and compliance. Anomalies in the polygons may mean the farm may need to be remapped depending on how severe they are.

The reality is turning out to be more complex, with many farmers without connectivity, the right training, and little awareness of what’s coming. Honduras, whose $30 billion economy relies on exports of textiles, coffee, and palm oil, is among the poorest countries in the western hemisphere and can’t afford to lose revenue.

Honduras ranks third-most exposed to EUDR regulations, with 3.5% of GDP in the tropics. Smaller economies, such as Serbia, Bosnia and Herzegovina, Papua, New Guinea, Nicaragua, Libya, Malaysia, Ivory, Costa Rica, and Uruguay, are more dependent on their trade with the EU. Most Honduran farmers are not ready for EUDR regulations, according to the Honduran Coffee Institute (IHCAFE). The group has just 120 experts to assist 120,000 growers in preparation for the law. The risk is that many Honduran farmers lose access to the European market.

Comisuyl, a cooperative of 120 farmers, focuses on high-quality crop production and hopes the EUDR will get them higher prices to make up for extra costs. Less than 20% of Honduran farmers are ready for EUDR due to reasons like a lack of traceability or due diligence, according to Dimitra, which is currently covering the mapping costs at Comisuyl farms.

The vast majority of 12 million coffee farmers around the world are unaware of the new EU regulations, and tracing supplies all the way to their farms can be a daunting task. Coffee is Ethiopia’s number one source of export revenue, and the EU is its top customer, accounting for about a third of shipments.

Ethiopia has at least 2 million coffee farmers, with 40% living below the poverty line. Unlike countries like Brazil, Ethiopia has difficult land rights determination, making traceability even more difficult. The Oromia Coffee Farmers’ Cooperative Union has managed to map out about 5,000 farms out of its 557,000 members, at a cost of around $4 a farm. Oromia has recently set up a database of farmers with the assistance of the Geneva-based International Trade Centre and began training their staff to map up to 30% of the land covered by its members.

The EU is dispatching more officials on an information tour about the EUDR due diligence process, but implementation details are yet to be fully disclosed. The bloc has already deferred categorizing supplier countries by their risk status until a later date.

Ethiopia’s Oromia farmers are exploring alternative markets in Saudi Arabia, China, and Russia, while Uganda, another large coffee exporter dependent on the EU, is meanwhile trying to expand its trade with Russia and the Balkans. Farmers and companies want to get compensated for their efforts to comply, which spells higher prices for European consumers.

Read More @ Bloomberg

Source: Coffee Talk

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