PRESIDENT Donald Trump wastes no time in threatening to introduce tariffs on Canadian and Mexican imports. Speaking at a press event, last Monday night, the newly-inaugurated president said he could impose 25% tariffs on goods imported from Canada and Mexico by February 1. His comments came against the backdrop of an executive order setting forth an American First Trade Policy. Among its provisions, the executive order directs the U.S. Trade Representative (USTR) to review China’s compliance with the Phase 1 trade deal signed in 2020 and tasks the USTR with initiating the public consultation process for next year’s review of the USMCA (U.S., Mexico and Canada Trade Agreement). It also instructs USTR to take the lead on reviewing the USMCA’s effect on workers, farmers and ranchers.
Canadian Prime Minister Justin Trudeau responded on Tuesday by saying that Canada is ready to hit back. It is weighing retaliatory tariffs on up to $150 billion of U.S. products such as Kentucky bourbon and Florida orange juice as a possible response. Canada has also threatened an export tax on the 4M barrels a day of oil it sends to U.S. refiners, which could ultimately boost the cost of gasoline to Americans. Meanwhile, Ontario premier Doug Ford said a trade war is 100% coming. There will be a dollar for dollar tariff retaliation on American goods entering Canada. As soon as Trump applies tariffs, he will instruct Ontario’s liquor control board to pull all American-made alcohol from shelves. Canada is the largest purchaser of liquor in the world, he said.
Tariffs Could Sharply Increase Costs
The tariffs, if enacted even at small percentages, could sharply increase costs for American businesses and consumers, as reported in CBW’s January 6, 2025 issue. They would make U.S. agricultural products, including meat, harder to market abroad, while simultaneously raising costs for farmers, food manufacturers and consumers, say agriculture industry groups. Should Canada, Mexico and China impose retaliatory tariffs on U.S. meat and poultry exports, they could severely damage what is a vital global trade for the industry. Speculation about what tariffs could mean for the U.S. food industry and specifically meat and poultry processors and their customers outside the country was the topic of news headlines and pundits’ talking points for months before last Monday’s inauguration
The economic impact of tariffs could be immense, given the highly connected nature of the three North American countries. In fiscal 2024, Mexico became the No. 1 destination for American agricultural exports for the first time ($30 billion). Canada was No. 2 ($29 billion) and China was No. 3 ($25.7 billion). The U.S. in 2023 imported nearly 17 million metric tons (mt) of agricultural goods from Mexico worth $45.5 billion, according to USDA data. Top categories included fresh fruits and vegetables (about two-thirds of all U.S. vegetable imports come from Mexico) sugar, dairy products and distilled spirits like tequila.
Meanwhile, Mexico last year imported 40.45 million mt of U.S. agricultural goods worth $28.6 billion. Mexico is the No. 1 importer of U.S. corn and corn sweeteners, leaving American corn farmers particularly exposed to retaliatory tariffs. U.S. agricultural imports from Canada in 2023 totaled 23.6 million mt worth $40.1 billion, with top commodities including beef, pork, dairy products, oats and rapeseed oil. Through the third quarter of 2024, U.S. total exports were $264 billion to Canada, $253 billion to Mexico and $105 billion to China. More broadly, those three countries shipped more than $1 trillion in goods to the U.S. from January through September of last year, according to the U.S. Commerce Department. More on tariffs in the next story.
RABOBANKS IDENTIFIES AG ISSUES
ONE of the biggest lenders to U.S. agriculture identifies some of the key issues the sector will face in 2025. Rabobank’s Agri Commodity Markets Outlook 2025 published on December 17 identified what it said were some of the top-of-mind issues concerning many stakeholders in the agriculture supply chain. These include the prospect of new tariff disputes, ongoing geopolitical conflicts across the globe and a contrasting stance on climate change-related policies that could profoundly impact energy sourcing, export opportunities and overall profitability. Tariffs threaten to compress margins for farmers, particularly those producing major grains and oilseeds, which already saw price declines in 2024, said Carlos Mera, head of Agri Commodity Markets Research at Rabobank. The Rabobank report noted that the U.S. imported $195 billion worth of agricultural products in 2023, a 280% increase over the past two decades.
Meanwhile, two veteran political strategists provided insights about how the new administration’s actions might affect the meat and poultry industry right out of the gate and for the ensuing four years. During a webinar hosted by The Meat Institute in December, the strategists addressed how the election outcome reflected voters’ overwhelming desire for change and how voting against the status quo could mean making some sobering compromises. Presentations during the webinar helped explain the meaning behind the Republican party’s victory and what the result might mean for the meat and poultry processing sector in the near future and for the next four years, said The Meat Institute.
Voters have decisively rejected the status quo, as they wanted change, consultant Tucker Eskew told the webinar. With Trump at the helm, Eskew expects immigration to be one of his first priorities, consistent with his campaign platform that proclaimed failure by the Biden administration. The immigration problem in this country got heightened and sharpened in the last four years. It has been a growing problem, said Eskew. Legislators have struggled to create a path to citizenship while cracking down on the worst of illegal immigration, which in some cases has resulted in perpetrators of crime and drug trafficking to flourish. Eskew said he thinks it is that worst of illegal immigration that the Trump administration will consider low hanging fruit, adding that there likely will be an initial emphasis put on high profile arrests and even deportations.
Immigrant Worker Programs Might Be Squeezed
Nathan Fretz, vp of legislative affairs with The Meat Institute, who served as moderator for the webinar, also chimed in on the possible fate of the segment of workers that many meat and poultry processing companies rely on for their daily operations. He referred to temporary protected status programs for immigrant workers and other visa programs. He sees those being squeezed, if not eliminated. That is certainly going to have an impact on the food and ag sectors, he said.
Solving the border security puzzle is difficult, consultant T.A. Hawks told the webinar. If you talk to any fruit and vegetable grower, and frankly anybody in most protein sectors, they all understand there are not enough Americans who want the jobs that need to be filled to ensure grocery store shelves are stocked with the products U.S. consumers have come to expect, he said. But finding a pathway to legal immigration policies that satisfy everyone without undertaking a comprehensive immigration reform bill as part of the Farm Workforce Modernization Act has proven too daunting for Congress for many years. There will always be a push on Capitol Hill to find opportunities to implement proactive programs to create that pathway. But there are distinctions to be agreed on regarding what dictates legal versus illegal immigration, which has been a long-standing sticking point, he said.
There is a track record for the backlash of tariffs dating back to the first Trump presidency, said Fretz. This should inform expectations in the coming months. As an industry highly dependent on exports, meat and poultry processors have reasons to believe tariffs imposed by the U.S. will result in retaliation from trading partners, as they did in Trump’s first term. Some of the things that The Meat Institute saw then were that beef and pork were a frontline for retaliation, and it expects the same this time, he said.
More Countries Use Non-Tariff Barriers
The newer wrinkle regarding tariffs is that more countries are also using non-tariff trade barriers and those could easily be implemented, said Fretz. They could include quotas and embargoes and would have the same effect of reducing American protein exports to some countries. Eskew said Trump’s plans for imposing penalties on goods crossing the border should be looked on as a bargaining tool. A self-proclaimed proud dealmaker, the second-time president has a tendency to initially issue very staunch threats, especially when it comes to trade, as an opening salvo in the negotiation process, he said. We may not like some of those results or we might agree with them but they will be a means to an end. Trump’s stance on tariff’s differs from the perspective of many economists, in that it is the foreign trading partner paying for the tariffs. He sides with those who view tariffs as a tax on consumers in this country but Trump does not see it that way, said Eskew.
Brazilian beef companies do not expect to be hurt by potential new tariffs from President Trump’s administration because of low inventories of cattle in the U.S. and a sizable tariff that already exists on these exports. Roberto Perosa, head of the Brazilian beef exporters association (ABIEC), said in an interview with Reuters that Brazilian beef exports outside a 65,000 metric ton (mt) annual quota already are slapped with a 26.4% tariff when entering the U.S. His remarks suggest that Brazil, the world’s largest beef exporter, will remain a key U.S. supplier despite any protectionist rhetoric from the Trump administration, said Reuters.
Brazilian companies exported $1.3 billion worth of beef products to the U.S. last year. The U.S. is in a difficult moment relative to its livestock cycle, and will remain so at least for the next two years, said Perosa. He leads the powerful beef lobby that represents firms like JBS SA and Marfrig, both of which have U.S. operations. Brazil exported some 230,000 mt of fresh and processed beef to the U.S. last year, up almost 66% from 2023, with most of it paying the hefty tariff. Scarcity of cattle in the U.S. means U.S. buyers will need to secure a reliable partner for large beef volumes. That partner is Brazil, said Perosa.
Brazil Tried To Get Quota Increased
Brazil has tried to negotiate an increase of its tariff-free quota to 150,000 mt with the U.S., said Perosa. But the state of the talks is unclear following Trump’s return to the White House. The U.S. is Brazil’s second largest export destination for beef after China and is also the South American country’s second largest trade partner overall. Brazil pays a 12% tariff to export beef to China, which took in $5.4 billion worth of Brazil’s beef last year, said Perosa.
Meanwhile, Smithfield Foods, the world’s largest pork processor, targets a valuation of up to $10.73 billion in its initial public offering (IPO). But Smithfield in its filing said its operations face potential hurdles from immigration and trade policies under President Trump. Traders worry that tariffs could spark trade retaliation that hurts U.S. agricultural exports. Exports last year accounted for 13% of Smithfield’s total sales through September, according to its filing. Increased U.S.-China trade tensions may hurt its stock price, the filing said. Smithfield, which has about 34,000 U.S. employees, could suffer worker shortages or higher employment costs if the federal government enacts new immigration laws, said the filing.
Hong Kong-based WH Group is spinning off Smithfield into a listed company as it looks to create a separate fundraising platform for its U.S. and Mexico businesses. The company, which carved out its European business last year, traded in New York from 1999 until 2013, when WH Group acquired it for $4.7 billion, then the biggest Chinese takeover of a U.S. firm. The IPO will involve 34.800M shares of common stock. The expected pricing is between $23 and $27 per share. Smithfield has applied to use the ticker symbol “SFD” to list its shares of common stock on the Nasdaq Global Select Market. The offering includes 17.4M shares of common stock to be sold by the company and 17.4M shares of common stock to be sold by the company’s existing shareholder identified in the registration statement. The underwriters of the IPO will be granted a 30-day option to buy up to 5.22M additional shares of Smithfield’s common stock at the initial offering price, less underwriting discounts and commissions.
PRICES CONTINUE TO SET NEW RECORDS
CASH live cattle prices continue to set new weekly records in what is one of the most remarkable price starts to a new year. Prices the week before last, basis a 5-area steer, averaged $203.67 per cwt live or $321.98 per cwt dressed. The live price was up $1.09 per cwt on the week before and the dressed price was up $1.73 per cwt. Only the live price though was a new record. Last week saw a limited cash trade through Wednesday, with prices at $205-206 per cwt live up north and at $201-202 per cwt live down south. Wednesday saw the February live cattle contract become the first contract to close above $200 per cwt live. It closed at $200.05 per cwt. It added another 105 points Thursday, with February also closing above $200 per cwt at $200.72 per cwt.
Carcass weights meanwhile set new records for steers and overall carcasses in the latest reported week ended January 11. Steer weights averaged 962 lbs, up 3 lbs on the week before and up 35 lbs on the same week last year. Heifer weights averaged 871 lbs, down 7 lbs from the week before but up 22 lbs from the same week last year. Overall weights averaged 882 lbs, up 1 lb and up 44 lbs, respectively. This was the equivalent of adding 31,055 cattle to the weekly harvest of 591,422 head, says HedgersEdge.com. Last week’s slaughter total was expected to be no more than 610,00 head, as packer margins remained negative and cutout values failed to match the higher cattle prices. The comprehensive cutout (cuts, grinds and trim) the week before last averaged $330.37 per cwt, up $6.92 per cwt from the prior week. Of note was an improvement in forward and export sales. They accounted to 17.8% and 14.7%, respectively, of the total volume of 7179 loads. The Choice cutout the first four days last week declined by $2.73 per cwt to $330.96 per cwt.
Steer And Heifer Slaughter Increased
Steer and heifer slaughter in 2024 was the only slaughter category to show a year-on-year increase. Beef cow slaughter had the largest year-on-year decline, followed by dairy cows and bulls. Examining heifer, beef cow and dairy cow slaughter as a percentage of total slaughter offers an indication of producer intentions for maintaining or growing their herds in the coming year, says USDA’s Economic Research Service (ERS) in its latest monthly Livestock, Dairy and Poultry Outlook report. As a proportion of total slaughter, heifer and cow slaughter declined by almost two percentage points from 2023. However, it remained the third highest share over the last 25 years. A year ago, hay prices for 2024 were expected to decline as forage supplies grew. As a result, calf prices were expected to rise to improve producers’ operating margins and support their willingness to retain heifers and cows, says ERS.
ERS also lowered its forecast for fourth quarter 2024 beef production by 50M lbs. The change reflects a marginal decline in all classes of slaughter from last month’s forecast, it says. The decline in slaughter is partially offset by higher carcass weights than previously expected. Heavier carcass weights likely reflect both the large proportion of steers and heifers in the slaughter mix and general weight gains by steers and heifers coming out of feedlots. As a result, total commercial beef production in 2024 is estimated to have been 26.985 billion lbs, a 0.1% increase from 2023, it says.
ERS however raised its 2025 beef production forecast by 125M lbs from last month to 25.790 billion lbs, a decline of more than 4% from 2024. In the first quarter of 2025, the production forecast is lowered to reflect a temporal shift in fed cattle slaughter from the first quarter to the second, it says. High fed cattle prices and tight cattle supplies will dampen marketings early in the year. Lower slaughter rates are partially offset by heavier expected carcass weights. It raised its second quarter beef production forecast to reflect the shift in marketings from the first quarter, as a greater share of cattle in feedlots are expected to have been on feed for more than five months. It raised its third and fourth quarter production forecasts on higher expected fed cattle marketings. The increase in second half 2025 marketings reflects higher than previously estimated placements in 2024’s fourth quarter that shifted expected marketings, says ERS.