Cuba’s Potential for U.S. Ag Trade is Lost in a Labyrinth of Politics and Policy – DTN

Though a future agriculture commodity market in Cuba holds promise, it will depend on whether the industry can convince the new administration and Congress about the benefits to U.S. farmers and ranchers of normalizing trade with the communist island.

There are a number of additional barriers that will need to be removed to open agricultural trade with Cuba. Three trade experts highlighted the issues for farmers and ranchers Monday at the American Farm Bureau Federation national convention in Phoenix.

David Salmonsen, AFBF senior director of congressional relations, said it is unknown what the future of trade with Cuba will be with a Trump administration and a new Congress.

“You start talking agriculture in Cuba with members of Congress and they change the subject,” he said. “There are an awful lot of products wrapped up in this. We’re not sure of the new administration’s attitude on this. We don’t know if they’ll go backwards.”

Marri Carrow, regional director for the Western Hemisphere at the U.S. Grains Council, said her group is doing all it can to expand U.S. market opportunities in Cuba.

“Cuba has been a very difficult market for us,” she said.

Because the U.S. Grains Council receives USDA funds, the group is barred from doing certain work in Cuba. What’s more, because Carrow is an American citizen, it makes it difficult to travel freely in Cuba.

“It extremely restricts our abilities for success in the region,” she said.

There are a number of U.S. policies and other issues that need to be changed by Congress. In addition, there are monetary issues restricting the expansion of trade relations between U.S. and Cuba. For instance, potential buyers of U.S. commodities and other products have no access to credit.

“We will need third-party banks to get involved at some point,” Carrow said.

“Getting money out of Cuba is extremely difficult. It really comes down to the buyer and seller. You’re not buying grain one time. Trade is a relationship. Right now, we’re not allowed to use the U.S. government credit programs. This would need to be changed.”

When it comes to corn in particular, Carrow said U.S. producers have the potential to access a 1-million-metric-ton market. Cuba is the second-largest corn market in the Caribbean.

Since the Obama administration action on Cuba, Carrow said tourist interest in the nation is beginning to grow.

When it comes to U.S. beef, because it is expensive, the poor Cuban population is unlikely to be a good market for U.S. producers, she said. If U.S. tourism interest in Cuba continues to grow, Carrow said it could open a beef market to feed those tourists.

“If we capture all of the Cuba share, it would be our 12th largest importer of corn in the world,” she said.

“We used to have a 60% to 70% market share (for corn) in Cuba, now it’s zero.”

While cash and credit access are major barriers for Cubans to the U.S. agriculture markets, Carrow said Cuba lacks understanding of the U.S. export system, as well.

CUBAN TRADE LIMITED

Steven Zahniser, an economist with the USDA Economic Research Service, said there has been virtually no trade with Cuba in the past 20 years. Today, he said about $220 million of U.S. products are exported to Cuba. Zahniser said it is about two-thirds of what it was before the Cuban revolution 20-plus years ago.

In 2000, the Trade Sanctions Reform and Export Enhancement Act freed up U.S. exports of food and medical supplies to Cuba.

According to the U.S. Department of the Treasury, the TSRA defines agricultural commodities as food commodities, feed, fish, shellfish and fish products, beer, wine and spirits, soft drinks, livestock, fiber, including cotton, wool, and other fibers, tobacco and tobacco products, wood and wood products (including lumber and utility poles), seeds, and reproductive materials such as fertilized eggs, embryos, and semen. It also includes certain fertilizers and organic fertilizers that are not otherwise controlled.

In the past two years, the Obama administration took some initial steps to open trade relations with Cuba. Zahniser said part of that includes a memorandum of understanding between USDA and Cuba to allow for a rotating USDA staffer in the U.S. embassy in Cuba.

Since the TSRA in 2000, Zahniser said agriculture exports to Cuba peaked at about $700 million in 2008. Those tapered off significantly to about $150 million in 2015 and expanded a bit in 2016 to around $195 million.

Zahniser said instead of the U.S. being a major supplier to Cuba, the nation uses multiple suppliers for a variety of commodities. This has limited the recent growth of U.S. agriculture exports to Cuba. Conversely, China and the European Union are the largest buyers of Cuban exports.

There is the potential for U.S. farmers to grow exports to Cuba to about $1 billion annually. Zahniser said a future Cuban export market would likely be diversified. The U.S. would likely export a wide range of commodities to Cuba, including corn and soybeans.

“Because Cuba is isolated,” he said, “their approach to food security has led to a unique dietary profile.”

For instance, Cuba is protective of its egg industry. So when the avian flu scare hit the U.S., Zahniser said Cuba responded by cutting all egg imports.

Zahniser added that opening full trade relations with Cuba would lead to increased Cuban imports to the U.S.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN




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