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Canadian Cattle Shortage May Slow Beef Market Benefit from CETA Settlement

October 3, 2017
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Interesting news for commodity traders emerged today as Reuters reports that Canada and the EU have reached a settlement over a dispute over Canadian beef exports:

Under the terms of the deal, Canada gives up any right to retaliate over the decades-old complaint, which alleged the EU was breaking WTO rules by banning hormone-treated beef. The eventual deal allowed Canada to raise its exports to the EU in stages to 50,000 tonnes of duty-free beef, as well as 80,000 tonnes of pork and 100,000 of wheat.

This comes just as the U.S. and Canada are in the midst of renegotiating NAFTA. Canada has been looking for trade opportunities elsewhere as the Trump administration continues to talk tough on NAFTA. With increased access to the European beef market, Canada will be able to offset some of its current beef trade with the U.S. and diversify.

However, there is an underlying issue with the Canadian beef industry that may prevent long-term exploitation of the deal. The National Post put out an article last month that points to Canadian cattle populations being at 27 year low:

On Jan. 1, Statistics Canada counted 11,850,000 total cows in Canada — already a 26-year low. Now, U.S. authorities monitoring the Canadian cattle market suspect that by 2018 it will drop even lower, to 11,725,000. “Canadian cattle farm numbers have continued to contract as ranchers retire out of the industry without a successor,” reads a new report by the United States’ Foreign Agricultural Service.

If the Canadian cattle population continues to diminish, the new agreement’s new quotas won’t be sufficiently exploited. It remains to be seen how Canada will address this issue going forward.

To read Reuters’ report on the settlement between Canada and the EU, click here.

To read The National Post’s article on the Canadian cattle shortage, click here.

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