The European Union Deforestation Regulation (EUDR), which will come into effect at the end of this year, is making the soy chain in Brazil review its logistics to ensure the traceability of production to importers.
According to the new rules, shipments of wood, soy, beef, cocoa, coffee, palm oil, rubber and its byproducts whose production is linked to recent deforestation will be barred from entering the European bloc. The deadline for deforestation in areas where the items are produced is December 31, 2020. The new requirements apply to all producing countries.
Most Brazilian exports to Europe are soybean meal, used to feed dairy cattle and other animals that are part of European consumers’ diets.
According to the Brazilian Association of Vegetable Oil Industries (ABIOVE), which represents large agricultural trading companies operating with soy in Brazil, one of the measures being studied would be segregating part of the production. That would mean having separate plantations, silos, paths, and ships exclusive to serve the European market.
Adopting specific soybean production and logistics routines for the EU will increase costs, while the sector remains uncertain whether Europeans will pay more for segregated soy meal, said Bernardo Pires, director of Sustainability at ABIOVE.
At the same time, the measure ensures that the product demanded by Europeans will not mix with cargo that does not comply with the bloc’s standards.
A preparatory initiative for the EUDR carried out across the Atlantic Ocean by a large private European group indicates the size of the problem.
The Lidl group, with more than 12,000 supermarkets in Europe and over 370,000 employees, has been monitoring bulk carriers taking soybean meal from Brazil to Europe.
Monitoring has been carried out by technicians from Earthworm, a non-governmental organization based in Switzerland whose work in this project is supported by Lidl, said João Carlos Silva, regional coordinator of production chains at the Swiss NGO in Brazil.
According to him, between 2022 and 2023, the NGO assessed 19 ships carrying soybean meal from Brazil. Eight of these ships failed to meet the required standards—either because the experts identified that tracked and untracked soybean meal had been mixed up, or the origin of part of the cargo was related to deforestation.
From July 2023 to June 2024, nine other ships were monitored. One failed due to mixing soybean meal and another is still being assessed. The Earthworm team will analyze eight more ships with soybean meal from Brazil in the coming months.
“The problems identified in eight of the 19 ships had no commercial implications but led traders to act to improve their traceability levels,” Mr. Silva said.
He highlights weaknesses in the soy chain regarding the EUDR. “The first point is mixing tracked and untracked soybean meal, whether it is made at the port or not. The second point is the difficulty in carrying out a social and environmental assessment on soybean farms belonging to indirect suppliers [who sell to large producers to complete their sales to trading companies],” he said.
Laurent Javaudin, advisor for Climate, Energy, Environment, and Health, of the European Union Delegation in Brazil, told Valor that in this preparation period, some countries are testing logistical operations they plan to apply when the new rules come into force.
“Some producing countries organized simulations in the first months of 2024 to ensure that all stakeholders understand the system. For example, 46,000 tonnes of soybeans were shipped from Argentina to the EU during this period with support from the Visec project [Argentine soybean chain monitoring platform],” he added.
Mr. Javaudin said that importers in Europe will be subject to sanctions if they fail to certify their cargo is free from deforestation.
“Regulation concerns European importers, who will be held responsible for complying with the rules, and inspection will be carried out by authorities elected by each EU member.”
European authorities argue that the new rules represent an effort to ensure that the continent, and its consumers, do not contribute to deforestation of any kind around the world.
In 2023, Brazilian agribusiness exports reached a record $166.55 billion. In terms of value, the soy complex was number 1 in agricultural exports, with a share of 40.4%. According to ABIOVE, the European Union purchases 14% of Brazil’s soy complex exports, mainly soybean meal.
The Brazilian government says the EUDR has relevant defects, which may be questioned. “Sustainable development is a priority for the Brazilian government, which is unquestionably committed to combating deforestation,” Tatiana Prazeres, Secretary of Foreign Trade at the Ministry of Development, Industry, Trade, and Services, told Valor.
That said, she added, “The government views the EUDR with great concern. At this moment, Brazil is working to reduce costs and mitigate risks for Brazilian exporters in light of the new European rule,” she said, via email.
Brazil claims that the country’s data and systems are taken into account when defining deforestation. And that the rule is applied in the same way at the different points of entry of Brazilian products into the bloc, she said. In the Ministry of Development’s opinion, the new rule risks punishing countries that have preserved forests.
Brazil has presented its criticisms but remains dissatisfied. “The Brazilian side has said that all options are on the table, including the possibility of questioning the European bloc’s measure in the appropriate spheres.”
According to Helena Leonel Ferreira, an analyst at the Italy-based environmental consultancy Etifor, importers in Europe are awaiting clarification on the new rules. And that—mistakenly, according to her—they expect that, in 2025, inspection and sanctions will be flexible.
“We understand that 2025 will be a year of adaptation to the new European rules,” said ABIOVE’s Bernardo Pires.
He added that in meetings carried out in April with authorities in Germany, the Netherlands, Denmark, and Belgium, there was a clear consensus that problems would be highlighted, with no punishment though.
However, according to Laurent Javaudin, “the implementation of the new rules has not been postponed and its application remains scheduled for December 30, 2024.” Non-compliant products “will be banned from entering the EU market, as stated in Article 3 of the regulation,” he added.
Translation: Liliana Hage
