Ag a Winner in Cuba Diplomacy


by Chris Clayton DTN Ag Policy Editor

OMAHA (DTN) — U.S. agricultural exports should become one of the early economic winners under President Barack Obama's announcement Wednesday to re-establish diplomatic relations with Cuba and ease some trade and travel restrictions with the island.

The president's announcement means the U.S. will immediately begin talks with Cuba to re-establish an embassy and diplomatic relations, which have been halted since 1961. If all goes well, that should translate into a more normalized trade relationship as well.

Cuba has about 11.3 million people, which would rank it slightly below the population of Ohio. Trade with the country has revolved mainly around agriculture and medical supplies. Sales have been up and down over the past decade because restrictions would be lifted then reinstated and then lifted again.

USDA reports $415.2 million in ag exports to Cuba in 2013 and about $300 million reported so far this year. Frozen poultry products and corn make up more than half the major commodity exports to Cuba in a given year, but soybean meal and distillers grain shipments have increased in recent years.

Cuba started buying U.S. corn in 2001 and grew those imports, reaching as high as 811,000 tons in the 2007-08 marketing year. However, those corn purchases have dropped steadily ever since. U.S. ag exports to Cuba peaked in 2008 at $710 million, but dropped off in 2010 and have appeared to level off.

“I think most of that market share was lost because of trade restrictions, especially in finance,” said Erick Erickson, vice president of the U.S. Grains Council said of corn exports to Cuba. “If those restrictions were significantly lifted, or curtailed, I could see us getting a lot of that market share back.”

Erickson noted Congress would have to take action to lift all the trade restrictions to selling products into Cuba. Still, the proximity of the two will make U.S. ag products attractive to buyers there. “With respect to corn, the United States stands to regain a healthy share of Cuba's corn imports we enjoyed earlier in the 2000s.”

Joe Schuele, a spokesman for the U.S. Meat Export Federation, said USMEF has had limited involvement in Cuba because of restrictions regarding federal market access funds or checkoff dollars. Schuele noted red-meat exports to Cuba have been relatively small, mainly because most Cubans have limited purchasing power to buy imported pork or beef. “Really, the lack of purchasing power is a bigger obstacle,” Schuele said.

Besides agricultural commodities, the White House noted that items authorized for export would include home-building materials and “agricultural equipment for small farmers.”

Cuba also appeared to want the U.S. to ease restrictions on telecom and internet infrastructure. Those will now be authorized. The White House noted only about 5{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} of Cubans have access to the Internet, and telecommunications in the country are “exorbitantly high, while services offered are extremely limited.”

The American Farm Bureau Federation announced its support for the president's efforts. The group has a long-standing policy to support expanded trade with Cuba.

“The president's opening to Cuba promises to improve trade conditions by making it easier for Cuba to buy U.S. agricultural and food products. This is welcome news for our nation's farmers and ranchers,” said Bob Stallman, president of AFBF.

Stallman noted exports have been limited because of third-party banking requirements and limited lines of credit for Cuban buyers. The regulatory restrictions requiring cash in advance for the export of agricultural or medical goods from the U.S. will be modified to allow “cash before transfer of title” provisions that would require payment before goods arrive at Cuban ports.

“This will allow U.S. exporters to be more competitive with respect to their exports to Cuba and generally permit the export of agricultural products to Cuba so long as payment is received prior to the goods' arrival at a Cuban port of entry,” one senior administration official said on a morning conference call.

Office of Foreign Assets Control will also ease financial regulations and allow U.S. banks to establish relationships with other banks doing business in Cuba. Travelers will be allowed to use U.S. credit and debit cards as well.

Travel restrictions were eased in 2011. New rules will allow easier travel and trade in Cuba, and foreign visitors will be allowed to bring back up to $400 in personal goods from Cuba, as well as $100 in either alcohol or tobacco. Reporters on a White House conference call were quick to ask whether that would allow Cuban cigars through customs inspections, which will now be legal.



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Posted by Jami Howell

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