Live cattle prices headed higher

Beef Magazine announced that for the third consecutive week, packers have been holding the kill below 600,000, and in collusion, all been trying to break the cash steer market. It has not worked as cash has edged higher over the last three weeks.

As we enter the third week of March with Easter right around the corner, the Lenten season is a poor timeframe for beef demand although the following eight to ten weeks is typically some of -if not the strongest demand of the year. By Memorial Day, sources believe choice beef could be trading close to $350.00/cwt. if not higher.

As we look ahead, the leverage is slipping away from the packer and toward the feedlot as seasonal demand hits the market. As this happens, packers will lose their hold and be forced to chase to compete fiercely for slaughter inventory so they don’t lose market share.

On Jan 1, the industry had more than one million less feeders to place this year compared to last. With the supply of feeders outside feed yards being record small, it’s mathematically impossible to place more animals this year meaning that on-feed inventory will tighten – and packers know this.

As beef production continues to decline, the function of the market will naturally be to ration the tight supply through higher prices. Sources show concern that beef could eventually be priced so high that many consumers will back away from the beef counter as they anticipate lower beef production not only this year, but next year, and most likely again in 2026.

‘Product of USA’ label sparks trade battle

According to the Hagstrom Report, the Mexican government has criticized the “Product of USA” label announced last week by Agriculture Secretary Tom Vilsack for several products, including beef, believing the rule change portends retaliation in the international trade sphere and does not take into consideration the deep integration of the livestock and meat industries of North America.

The label is voluntary, but the Mexican Ministry of Economy said in a news release translated into English, “Restricting the use of the ‘Product of the United States’ label to products derived from animals born, raised, slaughtered and processed exclusively in the United States is discriminatory against Mexican producers and could create barriers in binational production chains, in particular, to Mexican exports of live cattle and beef and its derivatives, which, in 2023, amounted to 3 billion dollars (mdd).”

The Mexican government also threatened to take action through the U.S.-Mexico-Canada Agreement on trade (the USMCA) and/or the World Trade Organization while reiterating its firm commitment to constructive dialogue as the preferred path to resolve differences with its main trading partner despite their stance that the new rule creates “inconsistencies” with U.S. obligations to the WTO and that they (Mexico) “reserve the rights accordingly.”

Both Canadian Agriculture and International Trade Ministers said in a joint statement that they are disappointed the rule does not appear to take into account concerns that they’ve raised related to the “unique and important trading relationship” between the two countries, and that Canada intends to raise the issue during the agriculture ministers’ trilateral meeting with the United States and Mexico scheduled to take place in Colorado later this month.

The Hill reported that the North American Meat Institute released a statement last year explaining that “Congress repealed Country of Origin Labeling (COOL) because Canada and Mexico challenged COOL as a nontariff trade barrier….The U.S. government lost four times before the World Trade Organization authorized Canada and Mexico to retaliate and levy more than $1 billion in tariffs on goods….”

A representative for the North American Meat Institute told The Hill that the group did update its position after viewing a draft of the new regulation and “did not fight the new label,” stating the “USDA made some commonsense changes” to address some of their concerns, but noted that “the governments of Canada and Mexico retain the ability to retaliate without additional action by the WTO.”

U.S. pork producers have also warned of trade retaliation resulting from the “Product of USA” label rule, arguing pork production and distribution chains are internationally stitched together as a result of the 1994 NAFTA trade agreement and its successor, the United States-Mexico-Canada Agreement (USMCA), which got rid of pork tariffs across the continent.

The rule change is the latest sign of increasing protectionism in U.S. economic policies, following Made In America conditions on clean energy manufacturing provisions included in the Inflation Reduction Act.

Former President Trump, the GOP’s presumptive 2024 presidential nominee, has already proposed a blanket 10-percent tariff on foreign imports, a move that would further erode the international trade regime last significantly bolstered in the 1990s.

Concerned about the U.S. pullback from agricultural trade, GOP senators wrote a letter Wednesday to Vilsack and U.S. Trade Representative Katherine Tai, calling U.S. trade strategy “unambitious.”