Cuba decision has big implications for agriculture

The Obama Administration’s announcement that it would seek to dismantle many of the 50-year-old restrictions on how U.S. companies and individuals interact with Cuba was welcome news to many in the agriculture industry, which has long supported changes to allow U.S. farmers to more freely sell to a market that is both import-dependent and just 90 miles from U.S. coastline.

The island nation has the potential to become the 12th largest market for U.S. corn if trade is truly open, according to the U.S. Grains Council (USGC). USGC has accelerated plans to reengage that country in early 2015 as part of the organization’s wider strategy focusing on coarse grains and co-products exports to the Western Hemisphere.

“We have worked in Cuba for a long time, and we understand the Cuban market as well as the restrictions that have typically gone along with it,” said Tom Sleight, USGC president and CEO. “I have been to Cuba, as have many of our senior leaders. We look forward to reengaging with key players and taking advantage of this new environment to build markets for our members.”

The United States has sold corn to Cuba each marketing year since the early 2000s and distiller’s dried grains with solubles (DDGS) since 2005. U.S. corn market share has varied, running as high as 100% in the 2007/2008 marketing year but as low as 15% in recent years due to regulatory changes that made achieving financing more challenging.

Though farm leaders now have reason to be optimistic about an increased presence in Cuba, political and financing challenges remain. The Obama Administration’s move will precipitate an intense political discussion and some of the existing restrictions related to Cuba cannot be changed by executive order and must be addressed by Congress. The USGC will continue to gather details about the changes and undertake new activity ahead of 2015 market development planning.

In addition, Cuba does not grow wheat commercially and is the largest wheat market in the Caribbean, purchasing almost all of its wheat from the European Union and Canada. Cuba could import at least 500,000 metric tons of wheat from the United States each year but has not purchased U.S. wheat since 2011. Under the current embargo, the United States can export agricultural products to Cuba through the use of third-party banking institutions, which makes facilitating trade burdensome and often more expensive.

“U.S. wheat farmers are excited about the prospect of exporting more wheat to Cuba,” said Paul Penner, National Association of Wheat Growers President. “NAWG has long supported strengthened trade relations with Cuba and see this as a historic step in that direction.”

Cuba also offers a significant market for soybeans.

“Soybean growers are particularly excited about today’s announcement, specifically because of the promise that the Cuban marketplace holds for American beans, but also in the larger scope of trade’s ability to overcome even the most challenging geopolitical barriers,” said Wade Cowan, American Soybean Association (ASA) president. “Trade builds bridges between nations, but it also generates real and concrete value for American farmers by expanding and strengthening our opportunities in foreign markets. Whether it’s the burgeoning Cuban demand for pork, poultry and dairy or that nation’s expanded demand for cooking oils, American soybeans have a significant market opening just off our own shores.”

There will also be important changes for Cuba.

“More important in today’s announcement, however, are the implications for the Cuban people. While we have been able to sell our products in the country for decades, our Cuban customers were unable to secure the same financing and credit opportunities as other trade partners,” Cowan said. “Conversely, the restrictions on financing made it difficult for our products to compete in that marketplace. The easing of these restrictions will make it easier for American soy to gain a foothold in the market, but more importantly, it will enable the Cuban people to purchase the products that they need and want as their market develops.”

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