Forthcoming EU and UK regulation and a voluntary UK industry initiative are all aiming to ensure soya used in the supply chain is sourced sustainably.
Some of the country’s biggest retailers have reportedly been pushing for new measures to be introduced at the start of next year. However, uncertainty over how this will be done and the timings are already causing disruption, with significant premiums now in place for soya for the early part of 2025 when the new legislation is due to take effect, alongside longer-term question marks over who will cover the added cost.
As a result, representatives of farmers, feed companies and processors are calling for a more measured and gradual approch to be applied.
The UK Soy Manifesto
This principle of more sustainably-sourced soya is shared across the supply chain, includuing the signatories to the UK Soy Manifesto, which is driving the change.
The UK Soy Manifesto is a collective industry commitment to work together to ensure ‘all physical shipments of soy to the UK are deforestation- and conversion-free (from a cut-off date of January 2020 at the latest), fully implemented immediately where possible and no later than 2025’.
Its 47 signatories include 10 UK retailers (Asda being the most notable exception), various major meat processors, including Cranswick, Pilgrim’s UK and Sofina (Karro), and manufacturers, and some of the country’s biggest foodservice companies, including McDonald’s.
Its ‘supporters’, who aren’t direct signatories but take part in discussions, include the NPA, NFU, the Agricultural Industries Confederation (AIC) and the British Meat Processors Association.
The Manifesto’s commitments for its members and timings are being partly shaped by the EU Deforestation Regulation (EUDR) and the UK Forest Risk Commodity Legislation (UKFRC).
EUDR, which is officially due to come into force at the start of 2025, applies to a number of products associated with deforestation, including soya.
It seeks to ensure the listed products do not contribute to ‘deforestation and forest degradation in the EU and globally’, aiming to reduce carbon emissions by at least 32 million metric tonnes a year.
In December, at the COP 28 summit, in Dubai, the UK Government announced it was to introduce new legislation to regulate various products imported into the UK, including soya, to ensure they do not harm the world’s forests.
The UKFRC will regulate all relevant UK supply chain organisations with a global annual turnover of over £50 million, with exemptions for organisations that use 500 tonnes or less of each regulated commodity in the reporting period.
Soy Manifesto commitment
According to James McCulloch, head of feed at AIC, the UK Soy Manifesto’s commitment to a deforestation- and conversion-free supply chain by the end of 2025 goes beyond the requirements of the EUDR and UKFRC.
The EUDR covers all deforestation, legal and illegal but does not currently cover conversion and UK proposals are ‘pegged at illegal deforestation and conversion’, he explained. Currently, the majority of soya is supplied to the UK under a mass balance chain of custody model, where certified deforestation- and possibly conversion-free soya can be mixed on a boat with uncertified product.
If, for example, 60% of a shipment is certified and the rest isn’t, the importer can only sell 60% of it as deforestation- or conversion-free. There is, however, no physical connection between the certified volumes and the actual soya supplied.
The UK Soy Manifesto’s aim is to move to a physically verified deforestation- and conversion-free supply chain which would be fully segregated.
That would mean tracing soya from, for example, Brazil, at all points on its journey from its origin farm to a local elevator and on to the railway to be taken to a crush facility, from where it would be taken to a port for storage and then onto the ship, which would bring it to Europe, where importers distribute it to the purchaser.
“The challenge is to be in control of all parts of that complex supply chain, so it is possible to reliably trace every bean of that volume that arrives in the UK back to the farm,” Mr McCulloch added.
While the Soy Manifesto states that it wants the initiative in place ‘no later than 2025’, some retail members at a recent meeting were reportedly pushing to bring the timetable forward to the start of 2025 to align with the implementation of EU regulation.
Mr McCulloch questions whether this timetable is realistic, particularly as there are real doubts over whether EUDR will be implemented from the start of January.
“We don’t yet know what the full requirements of EUDR are going to be. In fact, 13 out of 27 member states have not yet appointed a competent authority to oversee the regulation,” he said. “There has even been discussion about holding the implementation date, but suspending sanctions for non-compliance for a period.”
Neither is there any certainty yet on the timings or details of the new UK legislation. A Statutory Instrument is expected to be laid in Parliament soon and there is likely to be a significant transition period before it is fully implemented and enforced, Mr McCulloch added.
Market uncertainty
In the short-term, the regulatory uncertainty at UK and EU level has had a damaging impact on the soya futures market. “Because nobody knows exactly what the regulatory requirements are, soya suppliers are struggling to give a price for early 2025,” Mr McCulloch said.
“It is frustrating for pig producers as soya is looking quite good value at the moment, but it is not possible to lock in prices for next year due to the uncertainty.”
Feed industry consultant Phil Baynes added: “Soya prices will definitely have to go up, as simply arranging the audit and issuing certificates will cost, let alone the transport of only certified material into the EU.
“As yet there is no mechanism for this to happen, but the UK government pledged at the latest COP that from January 1 only sustainable soya will be allowed in UK agriculture.”
“Needless to say that, at this point, there are no suppliers willing to offer prices from the end of December, as they have no idea what they are required to do, or how much it will cost.”
Yorkshire pig producer Joe Dewhirst highlighted a £100/t premium for early-2025 soya meal over late-2024 prices.
“December 2024 soya meal is currently around £375/t and January 2025 is around £475/t,” he said. “One of our key business strategies is to forward purchase our key feed raw materials when we see opportunities.
“We would normally have started purchasing soya meal for 2025 by now, but the huge uncertainty over pricing has left us sitting on our hands.
“This leaves us in a vulnerable position to any upward price movements, but we just cannot bring ourselves to forward purchase at such a high premium. We are keeping a close eye on any developments, but it is not a comfortable position to be in.”
Who will cover the extra cost?
With the new requirements, whenever they take effect, certain to add extra costs to the price of soya, another question being asked within the industry is who will be expected to cover it?
NPA chief executive Lizzie Wilson said this would be an even bigger issue if the timetable was brought forward.
“At the latest UK Soy Manifesto meeting, some of the retailers were chomping at the bit to get this in place from the start of 2025, but our proposal was to stick with the end of 2025 deadline, as it’s going to be very expensive to do that,” she said.
“If these new requirements are introduced across Europe at the start of next year, there’s going to a huge spike in demand for a supply of certified soya that clearly isn’t going to be there.
“The premiums will be massive, and we are clear that this must not fall on producers. We just don’t believe that the start of 2025 is realistic or manageable. We are now only eight months away and there is so little clarity on the whole thing. We would like agreement across UK Soy Manifesto Group to confirm its original timetable.
“If any individual company wants to move before then, that’s all very well, as long as we get a firm commitment from them that they are going to cover the extra cost.”
A representative from a company within the UK pork supply chain said that while they could understand why the majority on the group voted for implementation in January 2025, this would be a ‘huge own goal commercially’ and could cost the industry ‘a huge amount of money’.
“I am still not convinced sufficient volumes will be available – therefore, premiums will remain at between £50 and £130 per tonne, if you can get delivery,” they said.
“Whilst we are all united in the cause, there needs to be some compromise, with a 12-month transition factored in, as agreed upon in previous meetings.”
They also stressed that commercial conversations were needed within consumer-facing companies to ensure such premiums are acceptable as a cost of production increase and are shared equitably.
“This has been an action for a long time, but I am not sure progress is being made, given the immense pressure on price.
“It is one thing to push for something that is the right thing to do, but whatever actions are agreed, they must also be commercially viable and physically able to be delivered.”
Mr McCulloch added: “A lot of work is being done in origin countries to comply with these regulatory and other market requirements.
“Everybody is aiming to deliver a verified deforestation- and conversion-free supply chain. The issues are over what period of time that can realistically be delivered, the cost that comes with that and how it is shared.
“If parts of the supply chain are making commitments that go beyond regulatory requirements and want them in place sooner, we need a suitable transition, given that this would be extremely challenging for an efficient supply chain to manage and we also need recognition of those extra costs that will be incurred,” he said.
He cited the precedent of the introduction of non-GM soya in 2013, which resulted in a ‘sudden and immediate demand for non-GM soya, which was not available in the short term, resulting in ‘significant premiums’.
“As the AIC, we’re trying to avoid entering the same space,” he said.
Retail response
We asked some leading retailers for their position on the timing of the soya commitment, what it should entail and whether they were prepared to cover the extra costs.
Tesco sent some ‘background’ information suggesting it was working towards a target to only source soy from verified zero deforestation- and conversion- free areas by the end of 2025.
Tesco believes EUDR and UKFRC will help it and its supply chain improve traceability and transparency in its soya sourcing.
The retailer indicated it is working with its supply partners and others in the supply chain, including soya traders, to achieve a fair and balanced outcome for becoming 100% verified deforestation- and conversion-free.
Sainsbury’s did not respond to the questions directly but forwarded a policy document on ‘tackling soy-driven deforestation and ecosystem conversion’, which stated that it was ‘working closely’ with its suppliers to achieve its 2025 100% Deforestation and Carbon-Free (DCF) soya target.
“One core element of our Sustainable Soy Feed Requirements is that by 2025, our own-brand suppliers evidence that the soy in our supply chains is verified DCF by virtue of its low-risk origin (national or sub-national), or through effective monitoring/ procurement systems (eg satellite monitoring at farm level),” the document said.
“We recognise that the lack of supply chain transparency is currently a major challenge in the industry, and that there needs to be a concerted effort across the soy supply chain to improve it.
“We need to move away from a credits-based system towards delivering real supply chain visibility.”