Coffee prices surged to their highest levels in the latest auction, driven by strong demand as buyers stockpile ahead of the European Union's deforestation regulation, which threatens to tighten market supplies.
In Kenya, the cost of Arabica surged to $276 for a 50-kilo bag, up from $251 in the previous sale, marking the highest value since the start of the crop year in October.
On the global front, December futures for Arabica coffee reached a 13-year peak, while robusta recorded its highest level in a month.
The sharp rally comes amid concerns over potential supply disruptions following the European Parliament's move to enforce stricter deforestation rules.
If the EU fails to amend the regulations by December's deadline, the European Deforestation Regulation (EUDR) will take effect, curbing coffee exports from deforestation-prone nations such as Brazil and Indonesia.
The EUDR, set to come into force within a month, extends its scope to commodities including coffee, palm oil, and cocoa, raising alarm among traders over compliance challenges and repercussions.
The regulation requires companies to map their supply chains digitally, linking raw materials to specific plots. This mandate poses significant hurdles for smaller farms, especially those in remote regions.
Ethiopia, Africa's leading coffee exporter, is already feeling the strain, with reports of reduced orders impacting small-scale farmers who rely heavily on export revenues.
Some buyers have indicated that purchasing significant volumes of Ethiopian coffee may not be feasible under the new rules.
Traders also voiced concerns that coffee bought now could be subject to penalties if used in products sold in the EU after 2025 without meeting compliance standards.
The European market is crucial for Kenyan coffee, contributing significantly to farmers' incomes and foreign exchange earnings.
In the past financial year, Belgium, home to the EU's headquarters, emerged as the top buyer, importing coffee worth $64 million (Ksh7.4 billion), a 17 percent increase from the previous year.
Germany, ranked third, imported $36.7 million (Ksh4.2 billion), up from $28 million (Ksh3 billion) the prior year.
Deforestation, a pressing issue in Africa, is the second-largest contributor to global warming after fossil fuel emissions.
