In June last year, Europe approved a regulation which, since its birth, has raised light bulbs in the industry of producers of certain raw materials and has contributed to skyrocketing the prices of certain agricultural resources, like coffee or cocoa. The two commodities top the list of basic resources that have become more expensive so far this year, with increases of 72% for cocoa and 41% for coffee, not even accounting for declines of 5 % that prices experienced this Wednesday and in the preceding days. The drop in prices occurred after news that the European Commission was delaying the implementation of new anti-deforestation regulations by a year.a highly criticized regulation which promised to generate a serious shortage of certain raw materials on the Old Continent. Pressure to reformulate the regulations appears to continue in the coming months.
In recent months, tension has been growing between sellers as January 1, 2025 approaches, the date on which new European regulations would come into force which would require producers of raw materials such as coffee, cocoa, soya, beef, wood and rubber, to certify that their products do not come from deforested lands. They have been saying for months that the regulations are unclear and that there are “many doubts and questions that remain unanswered”, explained Vanúsia Nogeira, director of the International Coffee Organization.
The Organization warned a few months ago of the danger of a coffee shortage in 2025 due to regulations and positioned it as the biggest challenge in the sector, which makes sense considering that the Europe is the main consumer of raw materials on the planet. Problems have piled up, both for European producers and their suppliers, who have also harshly criticized the new regulations from the European Commission. Indonesia, for example, even accused the EU of practicing “regulatory imperialism” with this measure. Even, The majority group in the European Parliament, the European People’s Party, has been very critical of this rule, to the point of describing it as a “bureaucratic monster”.
The reality is that the regulation has been criticized left and right, for different reasons. To get an idea of the chaos that seemed to exist with this rule, just 3 months after its implementation, the European Commission still did not have the information system that would certify compliance with the regulation, as the agency explains . Bloomberg.
The price of coffee and cocoa falls by 5% with the news
Only three months before the end of the year and the entry into force of the new regulations, the European Commission finally agreed to reformulate the project. This Wednesday it was confirmed that the application of the rule would be delayed by 12 months, and the market reacted by generating falls of around 5% during the session in the prices of two of the most affected raw materials, cocoa and coffee. The first is the raw material that increases the most among the 34 most cited that it includes Bloombergand still accumulates a revaluation of 72% since the first day of the year. Coffee, for its part, increased by 41% and is the third product that has grown the most on the list this year.
Coffee continues to trade near its all-time highs, reached on September 18, at $5,722 per tonne. Since this date, its price has corrected by 10%, the strongest day of decline being that experienced this Wednesday with the decision adopted by the European Commission.
However, the price of cocoa has been moderating for several months thanks to better weather prospects for the planet’s main crops. However, even though it has fallen by more than 50% in just six months, it remains the commodity that has become the most expensive this year. Wednesday’s falls were preceded by two days of sharp declines in cereal prices, after Jefferies warned that sales of chocolate were significantly lower than those of other similar products.
