(Bloomberg) -- The world’s top soy exporter Brazil is at risk of losing ground in key European Union markets as limited data will make it hard for traders to prove compliance with forest-protection laws.

From 2025, the EU will require traders and companies to prove that soy and other commodities don’t come from lands affected by legal or illegal deforestation. The regulations also require imports to comply with local environmental laws, in Brazil’s case the Forest Code. 

Research from Trase and Instituto Centro de Vida shows traders will struggle to prove that soy from the Amazon and Cerrado complies with that code. A total 74% of the soy from the two regions was grown on farms that either didn’t comply with the regulations, or, in the absence of clear data, showed signs of potential breaches of the code. 

The EU is the second-biggest buyer of Brazilian soy, after China. US agricultural traders including Archer-Daniels-Midland Co. and Bunge Ltd. have reaped a bonanza from Brazilian soy this year thanks to bumper crops. 

“These results suggest that soy buyers and operators may overlook these issues and face challenges in systematically checking legal compliance within their supply chains,” researchers led by André Vasconcelos said in the report. “As a result they may face obstacles in continuing to export to the EU.”

The results indicate that Brazilian soy runs a higher risk of non-compliance with the EU Deforestation Regulation’s legality criteria, rather than the deforestation-free criteria.

Brazil needs to improve in terms of transparency and data sets, Vasconcelos, global engagement lead at Trase, said in an interview. 

“Once Brazil has even more transparency and more clarity on these data sets, it can really become an example for the producing countries in how to implement the EUDR,” he said.

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