Deforestation is the second largest source of the greenhouse gas emissions that cause climate change after the burning of fossil fuels, according to the European Commission. The EU had planned to ban the import of commodities from suppliers unable to prove their goods were not linked to deforestation.

The EU Deforestation Regulation (EUDR) would have impacted imports of cocoa, coffee, cattle, soy, oil palm, timber, rubber and related products like chocolate and leather.

It was scheduled to come into effect on Dec. 30, but last week the EU Commission proposed a 12-month delay, under pressure from industries and governments who said it would cause supply chain disruptions, exclude poor, small-scale farmers from the EU market, and drive up the cost of basic foodstuffs because many farmers and suppliers were not ready to comply.

The EU’s vegoil and oilmeal group Fediol said its members – which include trading giants such as Cargill and food processors like AAK – will suffer losses from a delay after paying premiums to secure raw materials that comply with the law.

“It’s a financial loss they are making by having been ready on time,” Fediol director general Nathalie Lecocq told Reuters.

Cocoa processors and chocolate makers face the same scenario with traders saying they had sold deforestation free beans to them at a premium of up to six per cent, amounting up to 300 pounds a ton.

The premium will now likely fall to zero as consumers won’t be willing to pay more for cocoa that complies with a law that has been pushed back.

That will leave the processors and chocolate-makers unable to pass on the cost and forced to absorb it.

“There’s real world implications to this. Whoever agreed to buy and pay that premium paid for nothing,” said a Europe-based cocoa trader.

Research published last month by Fefac, an EU animal feed industry body, estimated that EUDR compliant soybeans would cost five to ten per cent above regular beans.

Fefac, EU farmers lobby Copa-Cogeca, and various other EUDR-impacted industries welcomed the delay proposal, having previously warned that implementing the rules on time would result in many small businesses suffering.

The EUDR will require importers of commodities to prove their goods weren’t grown on land deforested anywhere in the world, or face fines of up to 20 per cent of their turnover.

The law requires companies map and trace their supply chains down to the plot where their raw materials were grown.

Critics said the measure is too complex as supply chains involve millions of farms and multiple intermediaries whose data is often difficult to obtain or verify.

The Commission’s delay proposal still needs to be approved by the European Parliament and member states.

The majority of members asked Brussels in March to scale back and possibly suspend the law while parliament members who oppose the delay do not have a majority.

The Commission said the vote would likely happen in November or December at the latest.

— Additional reporting for Reuters by Gus Trompiz

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The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, averaged 118.5 points in December, down 1.5 per cent from November and 10.1 per cent below December 2022 levels.

For 2023 as a whole, the index averaged 13.7 per cent below year earlier levels, with only sugar prices higher over the period. The FAO’s sugar price index did, however, decline 16.6 per cent in December from November.

This was “mainly driven by the strong pace of production in Brazil, along with reduced use of sugarcane for ethanol production in India,” the UN agency said in a statement.

The FAO’s cereal price index rose 1.5 per cent in December from November, as wheat, maize, rice and barley prices all rose amid hindered shipments from major exporting countries.

For the year as a whole however, cereal prices were 15.4 per cent below their 2022 average as markets are well supplied with the exception of rice.

The largest price falls were in vegetable oils, with the price index slumping 1.4 per cent in December, from November, and a substantial 32.7 per cent drop for the year as a whole.

The FAO’s meat price index dipped 1.0 per cent in December from November and was down 1.8 per cent year-on-year, while the December dairy price index rose 1.6 per cent month-on-month, but was down 16.1 per cent from a year earlier.

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Local conflict and weather extremes remain the primary drivers of acute hunger, aggravated this year by economic instability linked to the ripple effects of the COVID-19 pandemic and the Russia-Ukraine war.

“The severe drought in the Horn of Africa has pushed people to the brink of starvation. Acute food insecurity is rising fast and spreading across the world. Without a massively scaled-up humanitarian response, the situation will likely worsen in the coming months,” said QU Dongyu, head of the U.N.’s Food and Agriculture Organization (FAO).

Although global agricultural commodity prices have come off record highs in recent months, local food prices in several countries remain high and risk heading back up if a U.N.-brokered deal to boost Russian and Ukrainian grain and fertilizer shipments collapses.

Ukraine is the world’s fourth largest grain exporter, while Russia ranks third for grain and first for fertilizer exports.

According to the FAO’s quarterly ‘hunger hotspots’ report, co-authored by the U.N. World Food Programme (WFP), high prices for food, fuel and fertilizer have forced advanced economies to tighten monetary policy. This has increased the cost of credit for low-income countries, constraining their imports and forcing them to introduce austerity measures.

“These trends are expected to increase in coming months, with poverty and acute food insecurity rising further, as well as risks of civil unrest driven by increasing socio-economic grievances,” said the report.

— Reporting for Reuters by Maytaal Angel.

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The Russian invasion of Ukraine last month has severely curtailed shipments from the two countries, which jointly account for around 25 per cent of world wheat exports and 16 per cent of world corn exports, leading to surging prices for the grains on international markets.

These are now trickling down to retail food prices in some of the world’s poorest countries, according to IFAD.

“The conflict in Ukraine, already a catastrophe for those directly involved, will also be a tragedy for the world’s poorest people living in rural areas. We are already seeing price hikes,” said Gilbert F. Houngbo, president of IFAD.

He warned that hikes are set to cause escalating hunger and poverty, with dire implications for global stability.

Wheat prices are currently not far off levels seen during the last food crisis of 2007 and 2008, which sparked protests in many developing nations and is widely regarded as having contributed to the Arab Spring uprisings in the Middle East.

Russia is also one of the world’s largest suppliers of fertilizer — prices of which had already spiked last year, contributing to a 30 per cent increase in world food prices and a related increase in global hunger levels.

To help mitigate the crisis facing poor rural people who produce about a third of the world’s food, IFAD said it will focus on interventions such as cash transfers, strengthening remittances, setting up savings and loans groups, and providing subsidies for agricultural enterprises.

— Reporting for Reuters by Maytaal Angel.

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The U.N. agency said it is in the process of finding partners in Ukraine to help it distribute the food, and that it will also assist Ukrainian refugees coming across the border to neighbouring countries.

Ukraine closed its ports last Thursday after Russian forces invaded in the biggest assault on a European state since the Second World War. The closure means an inability to import goods, exacerbating food shortages caused by the general mayhem of war.

“In a year when the world is already facing an unprecedented level of hunger, it’s just tragic to see hunger raising its head in what has long been the breadbasket of Europe,” WFP executive director David Beasley said during a visit to the agency’s operations hub on the Polish-Ukrainian border.

The Russia-Ukraine war has contributed to surging global food price inflation.

The two countries account for 29 per cent of global wheat exports and 19 per cent of global corn exports. Ukraine is however unable to export due to the port closures, while Russia’s exports have been hamstrung by unprecedented Western financial sanctions.

The WFP itself buys more than half its wheat from Ukraine, and there are fears disruption to the country’s upcoming harvest will drive global food prices further and add to already worsening global hunger levels.

“The crisis in Ukraine could have a serious impact on vulnerable people around the world. (It) speaks to the urgent need not only to fund vital humanitarian aid programmes, but to invest in peace,” U.N Secretary-General Antonio Guterres said earlier this week during a funding appeal for Ukraine.

— Reporting by Maytaal Angel in London; additional reporting by Emma Farge in Geneva.

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The WFP, which was awarded the Nobel Peace Prize last week for its efforts to prevent the use of hunger as a weapon of war and conflict, said it had so far raised US$1.6 billion.

“We’ve got a lot more money to raise to make certain we avert famine,” David Beasley, executive director of the WFP, said at a conference organized by the U.N,’s Food and Agriculture Organization (FAO).

Beaseley noted seven million people had died from hunger this year as the COVID-19 pandemic, which could double hunger worldwide, claimed a further one million lives.

“If we don’t sort out COVID, (the) hunger death rate could be three, four, five times that,” said Beaseley.

The Rome-based WFP says it helps some 97 million people in about 88 countries each year, and that one in nine people worldwide still do not have enough to eat.

After declining for several decades, world hunger has been on the rise again since 2016, driven by the twin scourges of conflict and climate change.

“If you think about the wealth on Earth today we shouldn’t see one single child (go) hungry or die from starvation,” said Beaseley.

The WFP has dispatched medical cargoes to over 120 countries during the pandemic, and provided passenger services to ferry humanitarian workers where commercial flights were unavailable.

The agency, the world’s largest humanitarian organization, is funded entirely by donations. It provides school meals to 17.3 million children globally and delivered 4.2 million tonnes of food to regions or countries in need in 2019.

— Reporting for Reuters by Maytaal Angel.

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