The decision Thursday by Tyson, the third-largest buyer of Canadian cattle, is expected to lead to a drop in prices for producers.
"It really is devastating to the Canadian feedlot sector," John Masswohl, a spokesman for the Canadian Cattlemen's Association, said Thursday from Ottawa.
"It is hard to know what the full impact of this will be. This is terrible."
Masswohl said Tyson's decision shows the damaging effects of the U.S. country-of-origin meat labelling (COOL) policy, which Canada is challenging at the World Trade Organization and in the U.S. courts.
He said Tyson had been talking to cattle producers about their plan over the past few weeks. The move confirms what the industry has long feared.
Tyson said like others in the beef industry, it is disappointed with the U.S. rules that require labels on meat products to contain detailed information about where the products come from. It also means that meat coming from different countries has to be in separate packages.
"Unfortunately, we don't have enough warehousing capacity to accommodate the proliferation of products requiring different types of labels due to this regulation," Tyson spokesman Worth Sparkman wrote in an email.
"As a result, we have discontinued buying cattle shipped to our U.S. beef plants directly from Canada effective mid-October."
Sparkman said Tyson would continue buying Canadian calves for U.S. feedlots.
The Canadian Cattlemen's Association is part of a coalition that is in the process of appealing a U.S. court ruling last month. That ruling rejected a request for an injunction against the latest version of the U.S. label policy, which is to go into effect in November.
The U.S. announced earlier this year it wants to require even more detail on the origins of beef, pork and chicken sold in grocery stores.
Labels would include such information as "born, raised and slaughtered in the United States'' for American meat.
Cuts of meat from other countries could carry labels such as "born in Canada, raised and slaughtered in the United States.''
The coalition argues the policy would be costly and offer no food safety or public health benefit.
Other plaintiffs in the lawsuit include the American Association of Meat Processors, American Meat Institute, Canadian Pork Council, National Cattlemen's Beef Association, National Pork Producers Council, North American Meat Association and Southwest Meat Association.
The USDA first brought in the meat labelling rules in 2008, saying it would help consumers make informed decisions about food choices.
It lead to Canadian cattle shipments to the U.S. being cut in half within a year, and a 58 per cent drop in slaughter hog exports.
The U.S. then amended its regulations after the World Trade Organization ruled against Washington. But Canada believes the amendments due to go into effect next month are even worse.
The dispute will now be reviewed again by the WTO, but that can take time.
Earlier this year, the Canadian government released a list of potential U.S. agricultural products to which Canada could apply retaliatory tariffs. They include cattle, pigs, beef, pork, some fruits and vegetables and chocolate.
Agriculture Minister Gerry Ritz has said that while Canadians could see higher prices as a result, the U.S. will lose jobs and significant revenue from the tariffs.
Tyson said Thursday it is possible that its decision to stop buying Canadian slaughter-ready cattle will only be temporary.
"We remain hopeful that these new rules will eventually be rescinded and we'll be able to resume buying cattle directly from Canadian cattle feeders," Sparkman said.
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