US cattle numbers down by half a million head

While the US President Donald Trump was making the headlines this week with tariff announcements, USDA revealed a further fall in the number of cattle on US farms and ranches at the start of 2025.

Their annual survey showed that the total number has fallen to 86.7m which is 500,000 less than the 87.2m reported for 1 January 2024 which had been the lowest cattle population since 1951.

Last year was one of the most difficult for US beef processors in securing cattle supplies. With the price consistently around the equivalent of €6/kg or higher, all of the major processors were losing money in beef though this was offset by pork and poultry processing - in the case of JBS by having access to competitively priced cattle in Brazil and Australia.

In December, Tyson Foods announced the closure of a factory in Kansas with effect from 14 February with the loss of 800 jobs and two smaller further processing plants with the loss of 200 jobs.

The financial services company, S&P Global Commodity Insights report in July 2024 projects that the US cattle supply for factories is likely to remain constrained at least into 2026 and as a result factory capacity utilisation is at risk of dropping into the low 80s percentage. That would be an excess slaughter capacity of 4-5m cattle annually which would mean more factory closures.

Tariff impact on US factories

The problem of tight cattle supplies for US beef processors is further compounded by President Trump’s announcement that Canada and Mexico are his first targets for tariffs though a pause of one month has been subsequently agreed.

For over three decades there has been tariff free trade for agricultural commodities between the US and both Mexico and Canada.

As well as both countries supplying 530,000 tonnes of beef in the first eleven months of 2024, they are also suppliers of up to 2m cattle for US beef processors.

Mexican cattle are more likely to enter the US for finishing in feedlots while imports from Canada are more likely to be for direct slaughter.

If these become subject to a tariff, their cost will increase the cost for factory buyers further and numbers may fall more.

Potential tariffs on Irish exports to the US

President Trump has also indicated that the EU will be subject to increased tariffs.

The main concern in Ireland is the impact this will have on the pharma and tech sectors, which account for the vast majority of Irish exports to the US, and are also the major contributors of corporation tax to the Irish exchequer.

For Irish agriculture, the US doesn’t buy any lamb and only small amounts of beef and pigmeat so the direct impact of additional tariffs on these would be negligible.

However if tariffs were extended to include Australia and New Zealand it could cause displacement of their exports as they currently export huge volumes of both beef and sheep meat to the US tariff free.

If the US market became less attractive for them, then their next alternative for tariff free access would be the UK and EU for sheep meat. It would be the UK only in particular for beef as New Zealand has a small EU beef quota and the EU Australia trade deal is not yet concluded.

Therefore while there may be no direct impact of US tariff policy on beef and sheep meat, there could be indirect consequences if tariffs were applied to Australia and New Zealand.

Dairy tariffs

Irish dairy exporters have previously experienced the effect of an additional 25% tariff. This was imposed on EU exports as part of the Boeing Airbus dispute and came into effect in October 2019. It applied to butter and cheese exports to the US and continued until the middle of 2021 when they were suspended.

This effectively doubled the tariff as most Irish butter entered the US out of tariff, paying the full import duty which is also 25%. It made Irish butter and cheese very expensive in the US but the sector withstood the impact of this remarkably well.

Table 1 shows that in 2018, prior to the introduction of the additional tariff, Ireland exported 23,228 tonnes of butter to the US. In 2019, this increased to 28,010 tonnes and in 2020 increased again to 29,902 tonnes despite the extra tariffs.

Cheese exports were 6,956 tonnes in 2018, 8,092 tonnes in 2019 though they fell in 2020 to 7,331 tonnes. Looking at present performance, in 2023, Ireland exported 9,600 tonnes of cheese to the US and butter exports have continued to grow strongly, reaching 38,521 tonnes for 2023.

In the first 11 months of 2024, Irish butter exports to the US have surged to 53,962 tonnes and cheese exports have risen to 12,380 tonnes.

The US is now a critical butter export market, worth €468,000 up to November 2024 out of a total butter export value of just under €1.5bn.

If President Trumps pursues his aggressive use of tariffs it will have a serious impact on global trade including agriculture.

The consequences will be felt not just by exporting countries to the US, the American Farm Bureau who represent farmers, has warned that likely retaliatory tariffs will hit them.

For Irish farmers, the main direct consequences would apply to dairy, butter in particular, and to a lesser extent cheese.

We are also a major exporter of drinks to the USA and of course grain and dairy products are ingredients in the manufacture of whiskey and cream liqueur.

We are somewhat fortunate that Irish butter is at the luxury end of the US butter market where Kerrygold is the second largest selling brand.

Luxury products are always less price sensitive but anything that makes a product 25% more expensive at a stroke risk damaging sales.

It is also a positive that our sales to the US have previously withstood a 25% tariff even if it was for a relatively short time.

There is no good trade war for Irish farmers who rely on exports for 90% of sales. However, the reality is that if it comes to pass other sectors of the Irish economy are much more exposed.

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