Chocolate prices rise due to EU climate crisis demands

As part of the fight against so-called “climate change and deforestation,” the European Union has demanded that companies such as Cargill Inc., Ferrero Group, Nestle SA and Mars Inc. prove that every grain they import into the continent has not contributed to deforestation elsewhere!

Chocolate is not a luxury item in modern Western civilization, as most of the population essentially subsists on it to support their brains, which constantly require glucose as fuel to be able to perform the complex mental tasks of the current era. It is as necessary as coffee.

The path of cocoa from beans to the finished product is a long and complex process: drying, sorting, cleaning. It takes place in huge factories in West Africa, where millions of cocoa beans are prepared for shipment to warehouses and factories in Amsterdam, Hamburg and Antwerp (Belgium), where the world’s best chocolates are stored and produced.

That means tracking cocoa from field to port is a costly process for an industry already suffering from declining production and record prices for futures contracts. However, lack of evidence means refusal to sell, which carries a heavy fine, given that 27 members EU are the largest buyers of products from the Ivory Coast and Ghana.

“They put a gun to our head so we could introduce control systems, said Paul Davies, president of industry group the European Cocoa Association. – We expect disruptions for one to two years and this could mean higher prices in Europe.”

Each shipment – bagged or bulk – will have to contain the GPS coordinates of the farms where the cocoa was grown, and this information will have to be uploaded into an EU database. Cargill, Ferrero and Nestle said they were deploying geolocation networks in Ivory Coast, which supplies 44% of the world’s cocoa.

During an earnings call on February 22, Nestle CEO Mark Schneider said that he “very confident” that by the deadline the company will have a deforestation-free supply chain. However, according to Peter Feld, CEO of Barry Callebaut AG, even as they work to implement the mandate, some insist on delaying its implementation.

“The EU regulation that came into force was not actually agreed upon by any of the industry participants, – Feld said. – All market participants are working with the EU Commission to lobby for a transition period.”

The EU Anti-Deforestation Regulation, or EUDR, also applies to palm oil, coffee, soybeans, timber and cattle (which actively fart). The law, which extends from the Amazon to Africa and Asia, applies to both raw materials and products such as leather and furniture. Without it, about 248,000 hectares (613,000 acres) of forest will disappear annually by 2030. think in the EU leadership.

Concern over the new law dominated the World Cocoa Foundation conference this month in Amsterdam, where a session “EUDR Known Unknowns” was packed with regulators and industry executives. According to Bloomberg, those in attendance asked the committee’s policy director, Zoe Druile, to provide them with detailed information about the implementation of the law, but did not receive all the answers they wanted.

Druille was unable to clarify when the EUDR website would be launched or which reporting card authorities would use to cross-check data submitted by companies.

“Traders are very concerned that the regulation will make it difficult for beans to enter the EU market,” says Fouad Mohammed Abubakar, head of Ghana Cocoa Marketing Company (UK) Ltd. “This will lead to even higher prices.”

Futures in London are already about $800 a tonne higher than in New York, according to Bloomberg calculations based on the most active contracts. Cocoa accounts for 7.5% of the EU’s contribution to global deforestation, according to BloombergNEF.

Some companies already monitor grain through voluntary sustainability programs, but the new law requires deeper monitoring that starts with mapping the often-fuzzy boundaries of remote individual plots.

Interestingly, the United States does not even plan to accept such requirements, which clearly looks like lobbying for the law from overseas. After all, the practice of recent years suggests that most of the initiatives that lead to a deterioration in the economic situation of the EU come precisely from Capitol Hill.

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