Canada is no longer simply discussing trade diversification — it is actively advancing it. Over the past year, federal policy decisions and renewed trade initiatives have made clear that trade diversification is now a central pillar of Canada’s economic strategy. The objective is straightforward: reduce overreliance on the U.S. market while expanding Canada’s global trade footprint.

Within this context, the renewed momentum toward a potential Canada–Mercosur free trade agreement signals a tangible escalation of this strategy. Unlike exploratory talks with smaller or complementary partners, Mercosur represents engagement with one of the largest and most export-oriented agricultural blocs in the world. For Canada’s chicken sector, this shift deserves close and sustained attention.

Mercosur: A Different Scale of Agricultural Partner

Mercosur — comprising Brazil, Argentina, Paraguay, Uruguay and most recently Bolivia, represents more than 270 million consumers and plays an outsized role in global agricultural trade. The bloc is a dominant exporter of chicken, beef, soybeans, grains, sugar, and pork.

For Canada, negotiations with Mercosur are not simply about identifying new commercial opportunities. They raise fundamental questions about how Canada manages trade relationships with countries that possess massive export capacity, structural cost advantages, and a clear strategic focus on expanding global market share.

Brazil: An Agriculture Superpower

Within Mercosur, Brazil is the defining actor. It is the world’s largest chicken exporter and the third-largest producer globally, trailing only the United States and China. Current projections indicate that Brazil is expected to export approximately 5.1 million tons of chicken in 2026, accounting for roughly one-third of its total production.

Brazil’s competitiveness is structural rather than cyclical. Its scale, vertically integrated production model, and cost structure — reinforced by currency dynamics — allow it to compete aggressively across international markets. The estimated cost of live chicken production in Brazil is approximately US$0.84 per kilogram, compared with roughly US$1.64 per kilogram in the United States, highlighting a substantial and enduring cost advantage.[1]

Brazil is also rapidly expanding its global reach. In 2025 alone, it opened 24 new poultry export markets, while exports to destinations such as Chile, Cuba, Russia, and Singapore continue to grow. In parallel, the European Union has agreed to provide 180,000 tons of chicken access under the EU–Mercosur agreement — a development that underscores the scale of access under discussion in negotiations.

Canada Is Already Exposed

Canada’s exposure to Brazilian chicken is no longer theoretical. Imports from Brazil reached 10.7 million kilograms in 2025, making Brazil Canada’s third-largest source of chicken imports after the United States. Before facing production issues due to HPAI, Brazil used to be the second import market for Canada after the US, demonstrating Brazil’s ability to compete effectively even within Canada’s existing trade framework.

This context matters. Any additional preferential access — whether through expanded tariff-rate quotas, reduced over-quota tariffs, or preferential treatment for specific poultry products — would magnify competitive pressures on the Canadian chicken sector, already fragilized after several concessions given through previous trade agreements.

Lessons from Europe

Canada is not alone in approaching Mercosur cautiously. The European Union, despite having one of the largest and most diversified agricultural markets in the world, has faced sustained opposition from farm groups and member states over the agricultural implications of a Mercosur agreement. Concerns have focused on import surges, competition from lower-cost production systems, and differences in environmental and animal-welfare standards.

If such concerns persist in a market of the EU’s size and scale, the risks are even more acute for Canada’s comparatively small and carefully balanced chicken market, where supply management plays a central stabilizing role for food security.

What This Means for Supply Management

Canada’s chicken sector operates within a finely balanced system designed to align production with domestic consumption, supported by predictable pricing and stable import controls through tariff-rate quotas backed by effective over-quota tariffs. This framework has delivered food security, long-term investment, and economic stability across rural and urban communities.

Granting additional preferential access to a global poultry exporter of Brazil’s magnitude would pose a direct challenge to this balance. Even incremental changes could displace Canadian production, weaken domestic processing activity, and shift value creation away from Canada’s supply-managed value chain.

Staying Engaged as Negotiations Advance

Canada’s trade diversification agenda is no longer abstract — it is unfolding in real time. The renewed push toward Mercosur reflects a clear willingness to engage with large, export-driven partners. For the chicken sector, this makes it essential that negotiations proceed with a clear understanding of sector-specific sensitivities and structural risks.

Chicken Farmers of Canada will be following these negotiations closely and will remain actively engaged throughout the process, working to ensure that Canada’s diversification efforts do not come at the expense of supply management, domestic food security, or the long-term stability of the Canadian chicken sector.

As Canada advances its trade agenda, striking the right balance between global ambition and domestic resilience will be critical.

[1] USDA : BR2024-0028, Poultry and Products Annual. 2024 https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Poultry%20and%20Products%20Annual_Brasilia_Brazil_BR2024-0028.pdf