Coffee Challenges 2024 ^†

Abstract

The coffee sector is facing a number of challenges in 2024, including the implementation of the new European Union (EU) deforestation regulation, the proposed reclassification of dichloromethane, the significant increase in the price of green coffee, and the effects of the EU corporate sustainability due diligence directive. These factors have the potential to result in a shortage of products on the market, which could have a significant impact on consumer prices.

1. European Union (EU) Regulation on Deforestation (EUDR)

The EU Regulation on deforestation [1] should come into force on 31 December 2024, but, at this moment, the coffee sector is struggling to meet its requirements for several reasons: 80% of farmers still did not map their coffee plots and the applications designed to help geo-coordinating are in the demo phase; furthermore, guidelines from competent authorities to harmonize and clarify the interpretation and operational implementation of the EUDR provisions or how to perform checks do not exist, apart from FAQs. The regulation’s effective implementation is contingent upon the resolution of numerous open questions, the majority of which may not be addressed by the end of the year. On 2 October 2024 the EU Commission proposed to postpone by 12 months the implementation of the Regulation [2] to allow Member States, exporting partner countries, operators and traders to be better prepared, and to fully establish the necessary due diligence systems covering all relevant commodities and products.

2. Reclassification of Dichloromethane (DCM)

Dichloromethane is an organic solvent with several uses, among which is the selective removal of caffeine from coffee beans. There is a proposal in the EU [3] on the reclassification of its carcinogenicity from category 2 (suspected carcinogen for humans) to category 1B (presumed carcinogen for humans). However, there is currently no scientific evidence to support this reclassification. Indeed, the most recent study, a comprehensive review published in 2021, concluded that this solvent’s classification under category 2 is appropriate [4]. A specific call for a ban of DCM decaffeination was recently rejected by the California Assembly [5], and now the same debate is occurring at US Food and Drug Administration (FDA) level [6].

3. Strong Increase in the Coffee Stock Exchange Prices

In the past few months, the coffee stock exchanges (both Arabica and Robusta) experienced a rally to levels never reached before, especially for Robusta [7,8], due to the lack of product from origin and speculative issues. The result is that, now, Robusta coffee, once considered a “cheaper coffee”, has a price sometimes even higher than Arabica and will likely lead to a higher cost for the consumer. The increase in the transit time for container ships carrying Robusta from India, Vietnam, and Indonesia (main Robusta producers) also has an influence on the supply of coffee in Europe, with a possible lack in availability of said product. Another important aspect is linked to climate change, affecting the productivity of coffee plantations; the heavy rains in Brazil and drought in Vietnam, together with the exchange rate of EUR/USD, contribute to the shortening of coffee stocks in consumer countries. The world’s demographic expansion and the increase in consumption in producing countries are two other important elements to consider.

4. Corporate Sustainability Due Diligence Directive (CSDDD)

On 1 June 2023, the European Parliament agreed on its position on the Corporate Sustainability Due Diligence Directive (CSDDD) [9], which requires in-scope companies to conduct due diligence and take responsibility for human rights abuses and environmental harm throughout their global value chains. The European Coffee Federation supported this proposal in May 2022 through a position paper [10], as it constitutes an important step towards the development and promotion of more socially and environmentally sustainable responsible coffee value chains, sustainable sourcing approaches, and the prevention of loss of biodiversity and natural resources.