News

Kay’s Cuts: US tariff threat clouds outlook for beef

Steve Kay 17/01/2025

A monthly column written for Beef Central by US meat and livestock industry commentator Steve Kay, publisher of US Cattle Buyers Weekly

 

 

 

CATTLE producers throughout North America are holding their breath with President-elect Donald Trump about to begin his second term in office.

They are hoping he will not go ahead with his threat to impose 25 percent tariffs on all goods from Canada and Mexico, an additional ten percent in tariffs on all Chinese imports and a 100pc tariff on imports from the BRICS nations, comprising Brazil, Russia, India, China and several nations in the Middle East and North Africa.

Tariffs, if enacted even at smaller percentages, could sharply increase costs for American, Canadian and Mexican businesses and consumers, economists say. They would make agricultural products from all three countries – including meat – harder to market abroad, while simultaneously raising costs for farmers, food manufacturers and consumers, say US agriculture industry groups.

Should Canada, Mexico and China impose retaliatory tariffs on US meat and poultry exports, they could severely damage what is a vital global trade for the US industry.

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 number one destination for American agricultural exports for the first time (US$30 billion). Canada was No. 2 (US $29 billion) and China No. 3 (US $25.7 billion).

The US in 2023 imported nearly 17 million tonnes of agricultural goods from Mexico worth US$45.5b, according to USDA data. Top categories included fresh fruits and vegetables (about two-thirds of all US vegetable imports come from Mexico) sugar, dairy products and distilled spirits like tequila. Meanwhile, Mexico last year imported 40.45m tonnes of US agricultural goods worth US$28.6b. Mexico is the No. 1 importer of U.S. corn and corn sweeteners, leaving American corn farmers particularly exposed to retaliatory tariffs.

US agricultural imports from Canada in 2023 totaled 23.6m tonnes worth US$40b, with top commodities including beef, pork, dairy products, oats and rapeseed oil.

US cattle producers have enjoyed several profitable years in large part due to declining cattle numbers and strong beef demand. These two factors will likely determine whether producers will have an even better year in 2025 than last year.

But the imposition of tariffs might pose a threat to higher prices. It might be several months before North America knows for sure whether President Trump will follow through on his threat.

This past year saw record prices for all classes of US beef cattle. Live cattle prices, basis a Five-area steer, averaged US$186.68 per cwt live, up 6.3pc from 2023’s US$175 per cwt live.

Feeder steers (Medium Frame No 1, Oklahoma City) averaged US$252 per cwt, up 15.3pc from 2023’s US $219 per cwt. Slaughter cows (live equivalent, cutter 90pc lean) averaged US $119 per cwt, up 25.3pc from 2023’s US $95 per cwt.

Cash live cattle prices in 2025 might average just under US$195 per cwt live, while beef production might total just under 11.8 million tonnes (26b pounds). The average live cattle price forecast by five industry analysts and USDA is US $195 per cwt. The average forecast for beef production is almost 26billion pounds, versus 27b pounds in 2024.

The significant decline in beef production guarantees that demand for Australian beef of all kinds will remain strong.

Record high prices for US cattle

In other words, US producers will again enjoy higher prices, albeit with smaller increases than seen in 2024. Notably, cash live cattle prices started 2025 at a record-setting pace versus a year ago. Prices the first week of January 2024 averaged US$174 per cwt live or US$275 per cwt dressed. The first week of January this year saw prices average US $199 per cwt live or US $315 per cwt dressed. Both were all-time record highs.

Packers were buying for a full production schedule after two holiday-shortened weeks. The threat of and actual powerful winter storms across the Corn Belt and the Central Plains also likely encouraged more sales.

Herd rebuilding?

The big question on the supply side of the industry will be whether higher prices will encourage cow-calf producers to retain more heifers than they did in 2024 and start expanding their herds in a meaningful way.

Three potential negatives to this would be widespread drought, tariffs and a sudden decline in beef demand. Right now, beef production is forecast to decline 5pc this year from last year, which will likely push retail beef prices higher.

Regarding the US beef processing sector, in a clear sign of declining production, Tyson Foods will close a beef plant in Emporia, Kansas on February 14.

But it is a beef and pork non-harvest facility. Tyson took over the operation of the plant in 2001 after buying Iowa Beef Packers. IBP had operated the plant as a cattle slaughter and processing facility for many years. But it ended those operations in 2008. The plant had a daily slaughter capacity of 4000 head.

Analysts do not anticipate that any US beef slaughter plants of any size will close in the coming year, although most if not all processors will lose money again this year. The reduced cattle numbers suggest that as brand-new plants start operations, they will struggle to bid cattle away from established players.

At least eight new plants are still in the works, with an avowed slaughter capacity of more than 9000 head per day. Most analysts doubt that much of this proposed new capacity will come to fruition.

 

 

 

 

 

 

 

HAVE YOUR SAY

Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

  1. Mitchell Sharrock, 22/01/2025

    Is a bullock style beats currently getting bought out of the US yards for $199 cwt (or circa $7 /kg.LWT)?

Get Beef Central's news headlines emailed to you -
FREE!