Headline: Danone Shifts Soy Supply from Brazil to Asia Ahead of EU Regulations

French dairy giant Danone has ceased purchasing soy from Brazil, opting for suppliers in Asia instead, in anticipation of stringent European Union regulations. This move comes as the EU prepares to enforce a new requirement obliging companies to ensure their supply chains are free from products linked to deforestation.

The forthcoming EU Deforestation Regulation (EUDR) will impact imports of commodities such as cocoa, coffee, and soy. Although initially set to come into effect on December 30, an EU Commission proposal suggests a 12-month delay is under consideration. The regulation aims to limit the importation of goods associated with deforestation, with potential fines of up to 20% of a company’s turnover for non-compliance.

Danone's Chief Financial Officer, Jurgen Esser, confirmed changes to the company's supply chain on Thursday. Esser stated, "We no longer source soy from Brazil," emphasizing Danone’s commitment to sustainability. "We have a very comprehensive tracking system to ensure we only procure sustainable materials."

This adjustment aligns with Danone's efforts to minimize exposure to deforestation risks. According to the 2023 forest report, soy constitutes a minor component of the dairy cows’ diet, making up approximately 5%. The company primarily feeds its cows with grass or grain. For Alpro products, Danone sources soybeans from Canada, France, the US, and Italy.

In 2021, Danone reported that 18% of its soybean meal volume for animal feed was sourced from Brazil. However, the company did not disclose when it stopped using Brazilian soy or which Asian countries it now sources from.

Brazil remains a leading soy producer globally, with a record harvest estimate of 170 million metric tons. As Europe's demand for Brazilian soy declines, exports to China have increased, surpassing one million tons weekly.

Danone's industry competitors have also addressed deforestation issues. Nestle SA stopped buying Brazilian soy from Cargill in 2019, while Unilever continues to source soy from Brazil thanks to its supplier CJ Selecta’s stringent zero-deforestation practices.

The new EU rules have raised concerns among industries and governments about potential supply chain disruptions, exclusion of small-scale farmers from the EU market, and increased costs of staple foods, as many farmers and suppliers are unprepared.