West Africa cocoa sector struggles to meet EU anti-deforestation rules, raising supply concerns

By Ben Ezeamalu and Could Angel

AKURE, Nigeria Aug 17 (Reuters) – Ojo Ayaninuola, a small-scale cocoa farmer from Akure in southwestern Nigeria, was initially reluctant to let exporters map and geolocate his farm as a part of measures to adjust to a looming EU anti-deforestation legislation.

However when one of many nation’s ‌largest exporters and the client of all his cocoa beans, Sunbeth World, warned that he might lose entry to the European Union, which buys 60% of ‌the world’s cocoa, he ultimately agreed.

Ayaninuola, who sells to an enormous and well-resourced exporter, is in an enviable place in contrast to different growers within the space and elsewhere.

Business specialists estimate that when the EU legislation ​banning commodity imports linked to deforestation comes into impact on the finish of December, farmers who develop greater than half the beans on the earth’s fourth-largest cocoa producer might fail to meet the bloc’s guidelines. Nigeria has about 300,000 largely small-scale cocoa farmers, in accordance to the Nigerian Export Promotion Council.

The state of affairs is analogous throughout West Africa, together with prime grower Ivory Coast. Business specialists say struggles to adjust to the legislation might squeeze the area’s exports to the EU and lead to greater prices for its chocolate makers.

The area grows about 70% of ‌the world’s cocoa beans and ships about two-thirds to the ⁠EU, information from the World Financial institution, EU and UN exhibits.

“There is a distinct chance that within the early days of the legislation, EU importers will not give you the option to get sufficient compliant cocoa from oblique or third get together shippers from origins like Nigeria, from Ivory Coast, from ⁠wherever,” mentioned sustainability marketing consultant Nicko Debenham, a former international cocoa dealer.

Debenham estimates that the supply squeeze within the EU might final about two years, throughout which exporters who’ve invested in assembly the bloc’s guidelines would command a premium from chocolate makers for his or her beans.

COUNTING THE COMPLIANCE COSTS

Geared toward ending the ten% of worldwide deforestation fuelled by the bloc’s consumption of imported items, the ​EU ​legislation would require that importers of commodities and associated items show their merchandise weren’t grown on not too long ago ​deforested land by, amongst different measures, tracing their uncooked supplies again ‌to the plot the place they had been grown.

Twice delayed due to its complexity, the EU Deforestation Regulation (EUDR) additionally requires proof from importers that the products had been produced in accordance with legal guidelines within the nation of origin.

Compliance is expensive and difficult, cocoa consumers say, particularly in international locations like Nigeria, Ivory Coast and Ghana, the place the business contains tons of of 1000’s of small-scale farmers residing in distant, rural areas.

Exporters have to map all the person farms, confirm land use and preserve — all through a multilayered supply chain — digital traceability information that EU consumers can depend on.

In Ivory Coast, solely about half the cocoa may be traced to the place it was grown, non-profit Trase mentioned in a examine launched in Could, largely ‌as a result of the remainder of the supply chain is oblique or entails a number of intermediaries.

EATING INTO MARGINS

Main Nigerian ​cocoa exporters akin to Sunbeth World say compliance is proving costly, with EU consumers resisting efforts so ​far to cross on the prices.

Sunbeth mentioned it spent the final three years ​mapping 124,000 hectares of farmland in southern Nigeria protecting about 60,000 metric tons of cocoa in its supply chain, at a price of $30 ‌to $70 per metric ton.

The corporate has additionally deployed tons of of area ​brokers over the previous three years to prepare ​its farmers to adjust to Nigerian legal guidelines, together with these in opposition to youngster and compelled labour, and employed a 35-person sustainability crew that works with Amsterdam-based information verification specialist Meridia, it mentioned.

“It’s costly to do that… (and) in early conversations with our offtakers, there was some pushback over who will bear the price of ​EUDR compliance,” Sunbeth Chief Working Officer Nzubechukwu Anisiobi instructed Reuters.

“The ‌cost-benefit evaluation proper now could be consuming into our margins.”

Starlink World and Very best, Nigeria’s greatest cocoa exporter, which ships about 60,000 tons a 12 months, mentioned ​it has spent $40 to $80 a ton mapping and tracing its supply chain since 2023 — prices it says have but to be recovered from European ​consumers.

(Reporting by Ben Ezeamalu in Nigeria and Could Angel in London; Enhancing by Emelia Sithole-Matarise)