The North American beef cattle herd size is at a 40-year low, after several years of drought and feed shortages in primary cattle regions have taken a heavy toll on cow and heifer numbers. While cattle producers are seeing record-high prices, the beef processing sector is struggling.
An official with the Canadian Cattle Association says a trade tariff war between the U.S. and Canada would disrupt one of the best price markets beef cattle producers have seen in years. Dennis Laycraft, executive vice president of the CCA, says demand for beef is high around the world right now.
“Our cattle numbers in Canada and the United States are the lowest they’ve been in close to 40 years. What helps drive this is very strong demand. So, the pull is there. We have tight supplies. Right now, world demand is growing faster than world beef production. We’ve got a record market. We don’t want to do anything that interrupts that dynamic.”
While cattle producers in both Canada and the U.S. are seeing high prices at all stages of the supply chain due to low herd inventories, this same lack of numbers has led to additional price competition among packers, as well as impacting processing efficiencies at plants.
Laycraft explains that higher prices due to tariffs on Canadian cattle is just about the last thing that some of the American beef processing plants need right now. Years of cattle herd reduction have left those plants scrambling to maintain a steady flow of cattle.
“It’s going to vary by different parts of the U.S. The plants in the Northwest – Washington State and Hyrams, Utah – they pull a lot of Canadian cattle in so that they can operate at capacity. I think the last thing the North American, and certainly the Canada-U.S. market, needs are any of these things that are going to complicate the movement of live cattle.”
And, while Laycraft is hopeful that incoming President Trump will reconsider his tariff threat, the premier of Alberta is less hopeful of those reconsiderations, and says that Canada is ready to retaliate. Daniel Smith met with Trump in Florida over the weekend, and she came back with the belief that Canadians and Americans should brace for a tariff war that will hurt business and consumers on both sides of the border.
“I haven’t seen any indication in the comments that he had with me that he’s inclined to change his approach. And if we put across-the-board 25 percent tariffs in place on American goods, that makes the cost of everything more expensive. This is why tariff wars are so painful. You end up hurting yourself in trying to retaliate.”