EU Deforestation Regulation could be Disastrous for U.S. Beef Trade

Source: U.S. Meat Export Federation

Despite numerous and wide-ranging calls for postponement, the European Union Deforestation Regulation (EUDR) is set to be implemented at the end of this year. EUDR was originally adopted in December 2021 as part of the EU Farm to Fork and Biodiversity Strategies and will impose mandatory due diligence requirements for companies wanting to sell cattle, soy, palm oil, wood, cocoa, coffee and rubber in the EU. Because products derived from these items are also included, these regulations apply to beef and hides. The European Parliament had sought to expand EUDR to include pork, poultry, sheep and goat meat and corn, but these products are excluded from the first round.

When EUDR enters into force, companies that want to place covered products on the EU market, or export them, must prove that their products are both deforestation-free (produced on land that was not subject to deforestation after Dec. 31, 2020) and legal (compliant with all relevant applicable laws in force in the country of production). As part of the due diligence, this includes submission of geolocations for the land where the cattle were raised. A country benchmarking system was also to be established in which the European Commission will assess the deforestation risk from countries, or parts thereof, that produce relevant commodities and products, but this has not yet happened.

While it is not surprising that beef is on the list of products covered by EUDR, the notion that U.S. beef production contributes – or benefits from – deforestation is far-fetched. But as Erin Borror, U.S. Meat Export Federation (USMEF) vice president of economic analysis explains, the steps required to comply with EUDR are not well-defined and the regulation makes the EU an even more difficult market for the U.S. beef industry to serve.

“The EU could have made this workable with a negligible risk classification that allows a supplying country to be written out of the regulation if it has rigorous data showing that its production of beef and other affected products is not impacted by deforestation,” Borror said. “But as currently written, good actors are subject to the same requirements as those regions where deforestation is a genuine concern. U.S. agriculture simply does not contribute to deforestation in the United States. The U.S. beef industry is part of the solution, not part of the problem, and we should not be penalized by this regulation.”

The U.S. is one of many trading partners to request a delay in the implementation of EUDR. In a letter delivered earlier this summer, U.S. Agriculture Secretary Tom Vilsack, Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai recommended that the European Commission postpone implementation until and unless sufficient changes are made. Among beef-exporting countries, concerns have also been raised by trade officials from Australia, New Zealand, Brazil and Paraguay. But calls for a delay are also coming from within Europe. European Agriculture Minister Janusz Wojciechowski sent a letter to EU President Ursula von der Leyen this summer, asking for a delay and for a general exemption for producers in low-risk countries. Agriculture ministers and industry leaders from many EU member states also continue to raise concerns about the regulatory burden and additional costs EUDR will impose on domestic industries.

“The EU is a challenging business environment anyway, because of its non-hormone-treated cattle (NHTC) requirements and other factors that add to suppliers’ costs,” Borror said. “EUDR represents even more costs of compliance and adds a layer of uncertainty that could cause U.S. exporters to simply walk away from the European market. While the EU is one of the highest value destinations for U.S. beef on a per-pound basis, serving this market requires a long-term commitment at every level of the supply chain. Right now, the market signals that would attract additional suppliers – whether we’re talking about cow-calf producers, feeders, processors or exporters – just aren’t there.”

Import data from the first half of 2024 show that U.S. beef already faces a difficult business climate in Europe. In the April-June quarter, imports under the U.S.-specific share of the EU’s duty-free High Quality Beef (HQB) Quota declined 26% year-over-year and were the smallest since the first quarter of 2022. For the quota year that ran from July 1, 2023, through June 30, 2024, imports totaled about 13,220 mt, down 6% from the 2022/2023 quota year. Less than 50% of the available U.S. share of the quota was utilized during this period.

“This downward trend in exports to Europe is one we are hoping to reverse, but EUDR will make this even more difficult,” Borror noted. “It will further complicate the export process and impose additional costs that deliver no value whatsoever to the consumer.”