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Cuba Beckons to U.S. Ag

By July 20, the U.S. flag will once again fly over the U.S. embassy in Havana, Cuba, President Barack Obama announced Wednesday. As the two nations restore official diplomatic relations broken in 1961, Cuba will also have an embassy in Washington.

This step in the thaw between two long-estranged neighbors coincides with a trip to Cuba last week by leaders of the National Corn Growers Association, the U.S. Grains Council, and the North Dakota Barley Council.

“Cuba could be a growing market for U.S. corn, but our own policies are standing in the way,” said USGC Chairman Ron Gray. “A major lesson from this trip was that the embargo has created an environment where our competitors such as Brazil dominate the market. If policy allowed us to help develop the Cuban market, we might be able to retake our dominant position.”

According to previous USGC assessments, Cuba has no broiler production and limited egg production. And, while imports from the U.S. are limited by longstanding policy, a lack of dollars, and credit challenges, the Cuban government wants its agriculture sector to grow. In addition, the Cuban people and foreign tourists could demand more meat products in their diet as the country’s economy improves.

Cuba is trying to revive its own struggling agricultural economy. Under the leadership of Fidel Castro’s brother, Raul, who took over running the government in 2008, some 4.25 million acres of idle land have been distributed to 200,000 people. Earlier this week the Cuban government reported 5.7% growth in livestock production in the first quarter of 2015 compared to a year earlier.

Last winter, shortly after the Obama administration announced plans to ease relations between the two nations, NCGA estimated that Cuba could become the 12th-largest export market for U.S. corn if trade is truly open. NCGA said the total market for corn in Cuba is 35.4 million bushels, along with another 150,000 tons of distillers' grains. 

That’s a relatively small market, slightly more than total corn production from the state of Delaware last year and less than 1% of the 14.5 billion-bushel national production. 

With the exception of the DDGS market dominated by the U.S., the share of American corn exports to Cuba has been declining, not growing. According to NCGA, “The United States has sold corn to Cuba each marketing year since the early 2000s and distillers' dried grains with solubles 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.”

A report last month by USDA’s Foreign Agricultural Service confirms the decline in sales for many U.S. commodities.

“The U.S. share of the Cuban market has slipped dramatically, from a high of 42% in FY [fiscal year] 2009 to only 16% in FY 2014.  The United States is now Cuba’s third-largest supplier, after the European Union and Brazil. U.S. exports have also become much less diversified, with poultry and soybean meal accounting for the lion’s share of trade last year. During the first six months of FY 2015, exports are down 40% compared to the same period the previous year, and have reached the lowest level since FY 2003.”

The U.S. has lost its once dominant rice export market in Cuba, with its traditional rice and beans now supplied by Vietnam and Brazil.

“For corn, Argentina and Brazil were the two largest exporters to Cuba in FY 2014, while the United States was third with exports valued at $28 million. The United States was Cuba’s largest corn supplier from FY 2002-2012. U.S. market share reached 64% in FY 2012 but has since declined to just 14% in FY 2014,” the report said.

If the U.S. takes more steps to ease trade restrictions to Cuba, FAS sees much more potential for not only regaining market share but increasing U.S. exports.

“Both USDA analysis and a study conducted by Texas A&M University for the American Farm Bureau Federation indicate that the full liberalization of trade with Cuba would create new opportunities for U.S. agricultural exports. The lifting of restrictions on travel and capital flow, and the ability for USDA to conduct market development and credit guarantee programs in Cuba, would enhance U.S. export competitiveness, drive Cuban demand for U.S. agricultural products, and help the U.S. recapture market share,” the report says.

The report points out that Cuba is the largest country in the Caribbean in terms of both area and population (at just over 11 million). According to IHS, Inc., which compiles data for the World Bank and the International Monetary Fund, Cuba’s gross domestic product will increase 2.7% in 2015 (to $87.1 billion) and will continue to grow through 2021. The rising GDP will lead to higher incomes and an expanding middle class, which, in turn, will lead to increased consumption of meat, dairy products, and processed foods, of which the U.S. is a competitive supplier.

USGS chairman Gray is even more optimistic – if U.S. policy changes.

“We have an opportunity to work with the Cuban people to build their industries and, at the same time, build demand for our grain,” Gray said. “The council has used this model all over the world, and it’s clear that type of engagement could now also work in Cuba given the right conditions.” 

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