Value swings immense on cattle with imposed tariffs by U.S.

Glacier FarmMedia—The tremors continue to be felt across Canadian agriculture following U.S. president Donald Trump’s earthquake announcement on Tuesday of a 25 per cent tariff on all Canadian products into the United States, excluding energy products, which will see a 10 per cent tariff.

That was certainly the case at the Alberta Beef Industry Conference in Calgary with murmurs during networking sessions among producers, at annual general meetings and as a topic of discussion with multiple keynote speakers during the three-day conference.

“”One of the first things I’m telling folks across the industry, whether it’s cattle producers in the U.S., Canada or Mexico, the only thing we know for certain right now is this is going to add volatility and uncertainty to an already volatile and uncertain market environment,” said Lance Zimmerman, a senior beef analyst for the North American market for RaboResearch Food and Agribusiness, during Day Two of the conference on Wednesday.

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“As we look at that volatility, a market that moved 10 per cent 20 years ago may of cost us about $60 to $80 a head. A value swing today at 10 per cent move in the market is worth $300 a head U.S. — add time-and-a-half to get to a Canadian value in terms of currency adjustment.”

Focus on risk management

With the sheer dollars invested in cattle today at nearly $4,000 a head , according to Zimmerman, a heightened focus must now be put on risk management.

Many people think of risk management in terms of contracts and the futures and options markets, but Zimmerman said it goes beyond that to include making sure all the bases are covered.

“One aspect of it is markets and financial risk. Another aspect of risk management is production risks, and then the very real risk that is being presented now is institutional risk from a government standpoint,” said Zimmerman.

“There are certain things we can control. We can’t control the markets, we can’t control drought, we can’t control a tariff, but there are things we can do to mitigate those risks.”

‘Lean on your network’

As the North American markets are feeling it out together, Zimmerman is encouraging producers to be hyper-vigilant in keeping up their communication as tense negotiations evolve daily in hopes to a quick end to the trade war.

“Get on the phone and really lean on your network right now. If you are on the feed yard side and you’re buying feeder cattle and calves out of the U.S. and bringing them up there, have discussions with your partners you’re buying from,” said Zimmerman.

While discussions have been heated and tense between Trump and prime minister Justin Trudeau in the early days of the trade war, Zimmerman has heard a general spirit of wanting and willing to work together among producers in the last 48 to 72 hours since the tariff announcement.

It is apparent in the Alberta beef industry that producers realize how small and tight-knit the industry is, a commonality shared across the U.S. border. A lot of fed cattle come out of the Alberta region and go into Pacific Northwest in the United States and a lot of dairy cattle are going from the U.S. into Canada.

‘Short-term’ tariff pains

“There are some short-term pains we are going through. For instance, I’m hearing instances of certain commodities that thought they could cross across the border today (Wednesday) and they are not able to. Whether that was mushrooms, or beef or other widgets, we are hearing a lot of instances of these things were priced pre-tariff and now the buyer isn’t just willing to write a cheque 25 per cent higher,” said Zimmerman.

“We have to work through those short-term pain points and no one knows really how to navigate this because the details are still flowing in in real time. We are specifically at a point in the cattle cycle today where we realize we’ve become a very much North American beef industry. We have our regional differences, but that’s no different in talking about the Pacific Northwest versus Texas, versus the Pacific Northwest versus Alberta. We have become accustomed to working together and helping each other through the challenges that exist.”

Zimmerman said the supply chains for basic production units are often globalized because amino acids and trace minerals often come from China. U.S. producers need to have discussions with feed suppliers and nutritionists to make sure that supply chain still exists with tariffs also implemented there.

Zimmerman has heard examples of some companies buying fresh colostrum in the U.S., bringing it into Canada, processing it and getting it standardized and unified as a dry product and then sending it back to the States.

“How do you treat that in this new environment?” Zimmerman said.

Constant communication

“A lot of it is getting on the phone, talking to your suppliers, talking to your buyers and sellers and staying in constant communication so that the communication flow continues to exist. Literally, what I tell you now may change an hour from now, not just a day from now.”

The immediate reaction to Trump’s tariffs has been negative as major equity markets around the world fell in response to Tuesday’s announcement. The EuroStoxx 600 fell by 2.14 per cent on the day, according to the Investment Strategists Team at IG Wealth Management. In Canada, the S&P/TSX Composite Index fell by -1.72 per cent. Exports to the United States represent 76 per cent of total Canadian exports as of the 12 months ending in 2024. These exports account for almost 20 per cent of Canada’s gross domestic product.

Canada, Alberta respond to tariffs

Canada’s response to Trump’s tariffs has been swift on both a national and provincial level. Alberta premier Danielle Smith announced the provincial government will avoid purchasing U.S. goods and services, including alcohol ($292 million in U.S. liquor sold last year in Alberta), and launch an advertising campaign to help shoppers buy Canadian products while U.S tariffs remain in effect. Other provinces across Canada have taken similar measures.

Even with feelings of western alienation, Smith has supported Trudeau’s response to Trump’s tariffs. At a news conference in Ottawa on Tuesday, Trudeau announced Canada would counter the tariffs by imposing 25 per cent retaliatory tariffs on $30 billion worth of U.S. products, and added that will grow to another $125 billion in U.S. goods in 21 days from the announcement. The list would include products such as electric vehicles, fruits and vegetables, beef, pork, dairy, electronics, steel, aluminum, trucks and buses.

The federal government has also been taking steps to mitigate the impact of the counter measures on Canadian workers and businesses by establishing a remission process to consider requests for exceptional relief from the tariffs imposed as part of national response to the U.S. applying tariffs on Canada.

The ag industry remains hopeful with Trump softening his stance in another industry on Wednesday, granting a one-month exemption on his tariffs on imports from Canada and Mexico for U.S. automakers.