Canadian cattle herd expansion gains momentum while pork export headwinds intensify

Canada's livestock sectors are moving in different directions as 2026 unfolds.

Canada's cattle herd is expanding for the first time in years, but tight North American supplies continue to support historically strong prices. The hog sector remains productive, but weaker export demand and growing global competition have weighed on market prospects.

Using the latest inventory, market and trade data, this outlook examines why cattle prices remain historically strong despite herd rebuilding and why the outlook for Canadian hog producers has become more challenging.

Cattle: Expansion continues, but tight supplies continue to support prices

Statistics Canada's July 1 inventory report answered the central question facing the cattle market at the start of 2026. Our 2026 cattle outlook identified herd rebuilding as the key factor that would determine how long cattle prices remained elevated. The latest data confirm that the expansion first identified in the January 1 inventory report has gained momentum. Canada's cattle herd is now firmly in the expansion phase of the cattle cycle, but North American supplies remain tight.

Total cattle inventories increased 3.2% to 12.1 million head, the largest year-over-year increase since 2004. Beef cow numbers rose 1.9% to 3.51 million head, replacement heifers increased 5.7%, and calf inventories climbed 4.6%. Despite these gains, Canada's cattle herd remains roughly 28% below its 2005 peak (Figure 1). However, heavier carcass weights have partially offset the impact of lower cattle numbers on beef production.

Figure 1: Canadian cattle inventories post largest annual increase since 2004

Sources: Statistics Canada, FCC Economics

Canada's herd expansion is clearly underway, but the broader North American herd has yet to show the same level of growth. Persistent drought conditions have slowed rebuilding efforts south of the border. July U.S. inventory data showed total cattle numbers were essentially unchanged from a year earlier (+0.2%), while beef cow inventories declined 0.7%. There are, however, signs that producers are positioning for expansion, with beef replacement heifer inventories rising 2.7% from last year. If sustained, that trend could eventually support larger calf crops and herd growth, but ongoing drought across parts of the U.S. could delay the pace of rebuilding. As a result, the U.S. calf crop is still expected to decline by 1.5% in 2026.

Because the U.S. accounts for nearly 90% of North American cattle inventories, the slow pace of herd rebuilding south of the border continues to constrain cattle supplies. Several U.S. beef processing facilities have closed as packers adjust to historically low cattle numbers, while restrictions on Mexican feeder cattle further tightened supplies before the recent phased border reopening.

Until the U.S. herd enters a sustained expansion, limited North American cattle supplies should continue to support Canadian cattle prices.

Strong cattle prices expected to persist

North American cattle supplies remain tighter than anticipated because U.S. calf production has yet to meaningfully increase. As a result, cattle prices have exceeded our initial 2026 outlook and are expected to remain strong, although prices should gradually moderate as herd expansion progresses (Table 1).

Table 1: Cattle prices remain above initial 2026 expectations

U.S. beef imports and country-of-origin labeling return to the spotlight

A source of uncertainty is the recent U.S. decision to allow up to 300,000 metric tonnes of lean beef trimmings used in ground beef production to enter duty-free over a 90-day period. If fully utilized, the additional imports would represent roughly a 10% increase in annual U.S. beef imports but only about 2% of total U.S. beef consumption, suggesting limited direct impact on cattle prices.

Another development worth monitoring is the Trump Administration's September 4 Ranchers First initiative, which includes a review of options for implementing mandatory country-of-origin labeling (MCOOL) in the U.S. over the next 90 days.

For Canadian livestock producers, MCOOL is once again on the radar. During the previous MCOOL period (2009 - 2015), some U.S. processors reduced purchases of Canadian cattle and hogs because segregating imported livestock increased processing and record-keeping costs.

Following recovery from the BSE-related border closures, live cattle exports rose to 32.6% of Canadian calf production in 2008 before falling to 23.4% in 2009 after MCOOL was introduced (Figure 2). Exports subsequently recovered as a severe U.S. drought from 2012 to 2014 reduced the U.S. cattle inventory. Strong U.S. demand for cattle during that period helped offset some of the policy's effects.

Figure 2: Live cattle exports as a share of Canadian calf production

Sources: Statistics Canada, FCC Economics

Any move toward reinstating mandatory labeling could introduce additional uncertainty for integrated North American livestock supply chains. While current attention is focused on beef, previous MCOOL rules also affected Canadian hog exports and pork processing flows, making the policy particularly relevant as Canada's hog sector becomes increasingly dependent on trade.

While cattle markets continue to be supported by historically tight North American supplies, high beef prices are also encouraging consumers to substitute toward lower-cost proteins, including pork. That trend has provided some support to pork demand. However, despite strong productivity and resilient U.S. demand for Canadian hogs, export conditions have become considerably more challenging.

Canadian hog production remains resilient, but pork export conditions have deteriorated

Canada's July 1 hog inventory reached 14 million head, up 0.6% from a year earlier. The pig crop increased 4%, domestic slaughter rose 2% and live hog exports increased 10%, reflecting strong demand from U.S. processors despite ongoing trade uncertainty.

However, while production and live hog exports have remained strong, international pork markets have become more challenging than anticipated (Figure 3). Canadian pork export volumes declined 7.1% during the first half of 2026 as shipments to several major Asian markets weakened. Exports to China fell 18.0%, reflecting the ongoing impact of China's 25% tariff on Canadian pork. At the same time, increased competition from Brazil and softer demand in parts of Asia contributed to a 10.9% decline in exports to Japan and a 39.7% drop in shipments to the Philippines.

In contrast, exports to the U.S. and Mexico increased 5.6% and 10.3%, respectively, underscoring the growing importance of North American demand in offsetting weaker overseas markets. As a result, total export value declined only 4.7%, less than the decline in export volumes, suggesting export prices remained relatively resilient despite softer demand conditions.

Overall, limited access to the Chinese market and intensified competition from other major exporters have created a more challenging global trade environment than anticipated at the start of the year, increasing reliance on North American markets to support Canadian pork exports.

Figure 3: Canadian pork export volumes weaken in the first half of 2026

Sources: Statistics Canada, FCC Economics

Hog markets become increasingly trade-driven

Earlier expectations of strong hog prices have weakened as exports to several key Asian markets declined and competition from Brazil intensified, reinforcing the increasingly trade-driven nature of the Canadian hog market.

Unlike cattle markets, where tight North American supplies continue to dominate price discovery, hog markets are increasingly shaped by international trade conditions. Growth in exports to the U.S. and Mexico and support from consumers shifting toward lower-cost proteins have partially offset weaker Asian demand, but not enough to overcome growing international competition.

Market hog prices in Ontario and Manitoba have been revised lower by roughly 13% to 14% compared to the initial 2026 outlook, while feeder hog prices have experienced even larger downward revisions (Table 2). The isowean market remains the exception, with prices holding relatively steady.

Table 2: Hog price outlook revised lower as export conditions soften

Bottom line

Canada's livestock sectors are finishing 2026 with very different market fundamentals.

Canada's herd is expanding, but North American cattle supplies remain historically tight because U.S. herd rebuilding has been slower than expected. While rising replacement heifer inventories suggest expansion may be taking shape, U.S. calf production has yet to meaningfully increase. As a result, cattle prices are expected to remain strong through the remainder of 2026 and into the year ahead, even as they gradually moderate from recent highs.

The hog sector presents a different story. Production remains resilient and live hog exports to the U.S. have increased, but weaker Asian demand and stronger competition have weighed on pork exports and hog prices. Although high beef prices continue to support pork demand, they have not been enough to offset export headwinds.

The divergent outlooks for cattle and hogs highlight the different forces shaping Canada's livestock sectors heading into next year. Our January 2027 outlooks will provide a more complete assessment of the risks and opportunities ahead.

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Leigh Anderson

Senior Economist

Leigh is a Senior Economist at FCC. His focus areas include farm equipment and crop input analysis. Having grown up on a mixed grain and cattle farm in Saskatchewan, he also provides insights and monitoring of Canada’s grain, oilseed and livestock sectors.

Leigh came to FCC in 2015, joining the Economics team. Previously, he worked in the policy branch of the Saskatchewan Ministry of Agriculture. He holds a master’s degree in agricultural economics from the University of Saskatchewan.