Butter Could Suffer The Most In Trade Dispute With Canada

As Canada and the United States remain locked in a trade dispute, dairy producers on both sides of the border are watching closely. Market analyst Shawn Hackett said dairy farmers could find themselves caught in the middle if those trade barriers remain in place. He projects the biggest U.S. dairy impact to be on butter.

“For U.S. producers, it means, especially for butter, we do sell a lot of butter to Canada, that would probably be the most impacted, the U.S. butterfat not going to Canada, and having to go elsewhere or get absorbed domestically and creating a surplus of butterfat," Hackett said. "I mean, I think that probably is the most impacted market of all the dairy derivatives that I could see in terms of where we do some of the most substantial trade. The other part is, because of the GLP-1s and the dramatic increase in the desire to consume more protein-oriented foods, your dry whey powders and such, that trade between Canada and the U.S. has gotten bigger."

Where Will The Protein Powders Go?

Hackett noted that Canadian producers also have a lot at stake, especially when it comes to protein-based dairy products sold south of the border.

“Well, I mean, if they can't sell their protein derivative dairy products to the U.S., then they're going to have to quickly try to find new markets to find a buyer," said Hackett. "And, doesn't mean they can't, but it doesn't mean they can right away. And it doesn't mean that the buyers overseas are going to be as excited to buy as we are, you know? I mean, there's logistics, logistics are just no longer what they used to be. There's the cost of shipping, the delays in shipping, we can't do Hormuz, bombs are flying all over the place. So, it would really back up what has been a really important lifeline for the Canadian producer in being able to sell these powder proteins to the U.S. It's been a very big trade for them, and they would certainly feel the pain of not being able to do that. I would say that's probably the greatest impact on their side, if it stays like this, if it stays like this.”

This May Not Be A Long-Term Issue

While both countries could face market disruptions, Hackett said the political backdrop is important to keep in mind as trade rhetoric continues to escalate.

“Many of these policies are probably not as long-term as many people might suggest, and they probably will soften as we get closer to the election, if it looks like there's too much pushback in a particular overreach. What Trump has tended to like to do, he tends to like to throw these trial bullets all over the place and throw these wild concepts out and see where's a lot of pushback and where's not a lot of pushback and then he quickly pivots on things, there's too much pushback and he reverses course. And so I think things will be not resolved by the elections, but I think they will be not as bad.”

Market analyst Shawn Hackett says it's too early to assume current tariff levels will remain in place long term. He expects the ultimate direction of trade policy may depend on the election results.

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