Global coffee prices eased this week following the extension of the European Union's deforestation law and favourable rainfall in Brazil.
Arabica prices retreated from a 13-year high in December futures trading, while robusta declined from last week's one-month peak.
Improved precipitation in Brazil and the delayed implementation of the EU's Deforestation Regulation (EUDR) alleviated immediate supply concerns and reduced demand pressures in the market.
The EUDR, initially set to take effect next month, broadens its reach to commodities such as coffee, palm oil, and cocoa, heightening worries among traders over compliance challenges.
The regulation mandates that companies map their supply chains digitally, linking raw materials to specific plots, a requirement that poses significant obstacles for smaller, remote farms.
The EU Parliament's decision to postpone the regulation's enforcement provides more time for compliance, temporarily easing market anxieties.
Earlier, coffee prices had surged to record levels as buyers moved to stockpile ahead of the impending regulation, which could restrict supply.
December Arabica futures had hit a 13-year high, while robusta saw its highest price in a month amid concerns over possible supply disruptions driven by the EU's deforestation policies.
In Brazil, weather data from Somar Meteorologia indicated that the primary Arabica coffee region, Minas Gerais, recorded 60.9 mm of rainfall last week, 127 percent above the historical average, boosting expectations for improved supply.
Brazil's key coffee-growing regions are facing their driest conditions since 1981, severely reducing output and driving up global coffee prices.
Between May and August, Brazil's agricultural hub endured its driest period in over 40 years, according to Cemaden, the country's natural disaster monitoring agency.
Traders had expressed apprehension that coffee procured now could face penalties if included in products sold in the EU after 2025 without meeting EUDR compliance standards.
The European market remains vital for Kenyan coffee, significantly contributing to farmers' income and foreign exchange earnings.
