Cargill’s reporting indicates that 96% of its soy products are deforestation-free, which suggests it is unlikely to fall materially foul of EUDR requirements. However, this assessment is based on proxies and estimates that may downplay the company’s true deforestation footprint.
If Cargill’s true exposure to deforestation is greater than disclosed, then it may incur fines and other costs for non-compliance, or may need to incur costs to make its supply chain compliant. Using scenario analysis, we consider the financial implications to Cargill assuming low, partial, and full compliance with EUDR legislation. This reveals that impacts to earnings could be significant, with the potential to degrade the scorecard underpinning the company’s credit rating from Moody’s.
Evidence from the pricing of Cargill’s outstanding bonds suggests the financial risk posed by EUDR-related costs has yet to be fully digested by market participants.
