By Sheri Monk

Canadian producers are heading into spring intensely worried about what the future may hold. The agricultural industry on both sides of the border is bracing for upheaval, but uncertainty and anxiety is more acute in Canada. This was reflected in Saskatoon last week at the SARM convention with many of the questions and topics centred around economics, trade and tariffs.

Beef and cattle industry: basis volatility and export barriers

With roughly 50 per cent of the total Canadian beef and cattle production exported, and of that, 75-80 per cent of Canadian beef exported to the U.S., producers are in for a rough ride.

“We are still down from the highs we experienced in late January and that obviously reflects the broad uncertainty with the timelines and the impact. There are major distinctions here between the short and the long-term impact,” said Tyler Fulton, vice-president of the Canadian Cattlemen’s Association (CCA).

Cattle feeders operate on very small margins, and many may already have forward contracts with finished cattle destined to go south. As some feeders found out when they were caught by the tariffs first implemented on February 4 before being paused, those margins are not near enough.

“They saw a 25 per cent tariff line item on their brokerage documents,” said Fulton. “For the feedlots that are sending huge volumes of animals south, the exposure on that 25 per cent was unlike anything they’d ever experienced before. To be clear, a 25 per cent tariff off the total revenue of that animal, that dollar amount absolutely dwarfs any potential for a margin on that animal. It is not at all sustainable for weeks – let alone months or years.”

**The crowd at the SARM convention, with the provincial cabinet in the background awaiting questions from the floor.** *Photo by Paul Heglund*

Contracts with cancellation and penalty clauses vary greatly from one to the next and feeders are going to be faced with very difficult choices as long as tariffs (or the threat of them) persists.

The cow-calf sector is on more stable footing – for now – with record-high prices realized over the last number of years. So far, prices for feeder cattle have remained high, but softening. However, there is no doubt that the fall run of 2025 stands to look much different than that of 2024.

The basis, which represents the difference between local and U.S. cattle prices, is expected to widen significantly, further eroding profitability for Canadian ranchers. A wild card, as always, is Mother Nature. In drought-stricken years, Canadian feeders import feed grains and cow-calf producers tend to send more animals to town when winter feed is tough to come by.

“The nature of the cattle business is that it is largely an economic-driven market, a free market that responds to supply and demand. It is hard to rationalize for any individual operation or packer or any aspect of the value chain to not realize the highest value market that you can,” said Fulton.

Capacity issues

Beef cattle inventories are still very low nationally despite the sharp upturn in prices since 2020, which may be the only factor that will lessen the fallout. Fulton says that the drought years of 2021 and 2023 served to effectively block the expansion signals, which means there are fewer cattle to process.

“If we are dealing with a tariff situation longer term, the priority will be how do we maintain the flow of cattle through the value chain? How do we maintain processing levels that are at a level that they need to be in order to not completely back up the system and make the problem worse,” questioned Fulton.

When Canada’s beef and cattle sector collapses, there is a trickle-up and down effect, that can sometimes appear delayed due to the complex nature of the industry. Feeder cattle cannot stick around much beyond their planned exit date. However, if beef exports drop, processing plants won’t have anywhere to send the beef and may reduce processing capacity and labour in response.

**Saskatchewan Premier Scott Moe speaks to delegates at last week’s SARM convention.** *Photo by Paul Heglund*

Initially, Canadian consumers may eat more beef as prices come down, but just like during BSE, Canada can’t eat their way out of such a large export market collapse. Feeders, stuck with fed cattle or desperate to take any price to offload finished cattle will not have much appetite – or budget – for calves. Cow-calf producers may not be able to move their calf crop as quickly, and they will begin to take a major price hit. In response, some may hold back their animals – if they have enough feed and grass to do so – which may increase the cattle inventory in a market in which it should be contracting. The coming corrections will be inevitable, and inevitably painful.

Crop farming: Canola, barley, and wheat face uncertain markets

The Canadian grain industry, particularly canola, barley, and wheat won’t be immune to the effect of the tariffs. Canola exports, which have already suffered from ongoing tensions with China, face additional pressure as demand from U.S. processors dwindles. With the U.S. imposing tariffs on Canadian canola, producers could see lower farmgate prices as domestic markets struggle to absorb excess supply.

Barley, heavily relied upon by U.S. brewers and livestock feeders, is likely to face declining demand south of the border. The potential for counter-tariffs from Canada targeting American agricultural products could make U.S. imports of Canadian barley less attractive, potentially leading to an oversupply in the domestic market and price depression.

The wheat industry may be in a slightly better position due to Canada’s access to alternative global markets, but the overall uncertainty could lead to lower investment in wheat production and hesitation from international buyers concerned about supply chain disruptions.

China – predictably unpredictable

China has always been an unpredictable and fickle trading partner, so it should have been no surprise that it retaliated against Canada over a surtax on electric vehicles (EVs).

Last October, Canada imposed a 100 per cent surtax on Chinese-made EVs and China announced in early March it would retaliate with 100 per cent tariffs against Canadian canola oil, oil cakes and peas, as well as a 25 per cent tariff on pork and aquatic products.

At the recent Saskatchewan Association of Rural Municipalities (SARM) convention held last week, Saskatchewan agriculture minister Daryl Harrison reported that the Canadian federal government was pressured by the U.S. government to impose the EV tariffs. He also said the Saskatchewan government was vehemently opposed to it, and made that clear last year.

If Canada reverses the EV duty, China may seek a more robust trade relationship with Canada, especially given the steel and aluminum tariffs imposed by the Trump administration. Beef trade to China ceased in 2021 after an atypical case of BSE was discovered in an Albertan cow.

This was a red herring trade ploy. Atypical BSE cases do not prompt trade barriers with other nations and because this type of BSE is universally sporadic and has no means of prevention. They occur everywhere, with an extremely low occurrence rate of no greater than one head per million. In people, the human-equivalent in humans is called sporadic Creutzfeld-Jakob disease, and the rate of its occurrence is 1-2 cases per million annually. That means that right now, China likely has roughly 2,800 people with the disease. It should also be noted that Canada’s enhanced feed ban makes it one of the safest beef sources in the world.

Since the Chinese beef ban is performative and dated, China may reverse this decision if its relations with the U.S. deteriorate further. In 2024, the U.S. exported $1.4 billion worth of beef to the Chinese market.

The future of supply management

The poultry, egg and dairy industries in Canada operate under a system of supply management. In this system, production (supply) is tightly managed through issuing quotas to producers, and by regulating market price. This ensures stability for both the producer and the consumer, but eliminates many free market aspects of production. Supply management of dairy products (largely cheese) was a sticking point in the five-year-long trade negotiations to sign the Comprehensive Economic and Trade Agreement (CETA) with the European Union.

**Daryl Harrison, Saskatchewan’s ag minister, answers the questions of an animated crowd at the SARM convention held last week in Saskatoon.** *Photo by Paul Heglund*

In the current trade agreement (USMCA) signed in 2018 between the U.S., Mexico and Canada, Canada imposes a 200 per cent tariff on dairy imported from the U.S. – but only after agreed-upon tariff-free quotas have been exceeded. Donald Trump frequently cites the 200 per cent tariff aspect as a major part of the justification for the current trade war, but in reality, borrowing a page out of China’s red herring playbook, the U.S. doesn’t even come close to exporting enough to trigger those tariffs.

So will supply chain management be sacrificed in order to negotiate a new deal with the U.S.? Experts think it unlikely. In 2023, the Canadian House of Commons passed Bill C-282, which mandates that Canada's supply management system be excluded from trade negotiations.

Pork industry: exports in jeopardy

Canada’s pork industry is historically very reliant on both the U.S. and China. Their value chain also moves much more quickly and is less segmented than the Canadian cattle industry. Additionally, their infrastructure is expensive and they typically don’t have a large land mass from which to borrow against. However, the Asian market are voracious pork consumers, and pork does flow from Canada to other nations.

Impact on farm inputs: machinery and supply chain woes

Beyond agricultural commodities, Canadian farmers also rely heavily on American-manufactured farm equipment, including combines, tractors, and specialized machinery. Covid caused widespread supply chain disruptions and the cost of equipment skyrocketed, which the industry is still grappling with.

U.S. agricultural industry response

The American agriculture industry is also going to be in for a bumpy ride – but their wheels aren’t as likely to fall right off. Potash is heavily imported by the U.S. from Canada, and while they are expected to largely import from Russia instead, they won’t be able to entirely replace Canada from that single source. Belarus and China are other potential sources.

Agricultural regions in the U.S. tend to vote Republican, even when against their own interests. However, close collaboration between U.S. and Canadian producer groups could help pressure the American administration to scrap the tariffs.

What next?

“There are just so many different variables and factors to consider in this,” Fulton said.

Indeed, but where to begin? While right now Canada’s agricultural markets may not appear to be very diversified, marketing agencies such as Canada Beef International and the Canadian Pork Council have been fostering relationships and promoting Canada’s meat for many years. In many respects, new trade roads have already been built and the traffic may be yet to come.

It is unlikely that bail-outs and subsidies for producers will prompt any meaningful countervail action from other trading partners while the tariff war continues. Canada’s impending federal election may prompt renewed trade negotiations. The grassroots response of Canadians and international supporters has cancelled travel plans en masse, and consumers are looking for products made in Canada. If the U.S. administration feels increasing pressure from many different spear points, they may be more likely to change their approach. One thing, however, is clear – Canada should be more concerned than ever for national food security, and those who produce it.