Relaxed Cuba sanctions good news for agriculture

Improved banking arrangements could help make U.S. agriculture more competitive in a market 90 miles from the U.S. shore.

The U.S. could see a bump in exports to Cuba and improved competitiveness with measures announced by President Barack Obama relaxing restrictions on the embargo which has been in place with the Communist-state for the past 50 years.

For agricultural groups, the action has taken a considerable amount of time but good news for one of our closest export destinations at less than a day’s sail from the Port of New Orleans. In 2013, the U.S. exported just shy of $350 million of agricultural goods to Cuba, with frozen chicken, corn, soybeans and soybean meal, as the top products. The most-sold U.S. product to Cuba in 2013 was frozen chicken — accounting for $144.4 million, or 41.4% of all sales.

Farm exports have fluctuated greatly over the last several years, going as high as $710 million in 2010 when trade sanctions with the U.S. and Cuba were partially relaxed. Cuba imports about 80% of the food it rations to the public, and has a diet heavy in products grown in the upper Midwest – including beans, dry peas, and lentils – reinforcing the strong demand for these products.

Dave Salmonsen, American Farm Bureau Federation trade specialist, said overall the announcement will help the U.S. be more competitive in what currently goes into Cuba. And if Cuba’s economy becomes more prosperous, it also has a longer-term benefit to increase the mix of products purchased including more highly-processed foods.

The U.S. has been selling corn and dried distillers grains with solubles (DDGS) to Cuba for more than a decade. “We support open trade, and if the market becomes open, we would work there to promote further exports,” said Melissa George Kessler, director of communications at the U.S. Grains Council.

USA Rice was the first U.S. group of any kind to exhibit at the 2001 Cuba International Trade Fair. Sales rose steadily reaching 176,631 metric tons in 2004, representing about 30% of Cuba's import needs.  Since then, however, imports fell and no sales have been made since 2008 - due to further U.S. government restrictions on definition of "cash in advance" and banking terms with Cuba.

Central to the President's initiative is a new approach to banking, allowing U.S. and Cuban banks to have direct relationships. "The changes to banking are very important because they will significantly reduce red tape and costs associated with doing business with Cuba," said Betsy Ward, president and chief executive officer of the USA Rice Federation. 

Salmonsen said previously the sanctions required Cuban importers to pay cash in advance before cargo could leave any U.S. port and then had to be routed through a third party bank.

The White House said the regulatory definition of the statutory term “cash in advance” will be revised to specify that it means “cash before transfer of title” which the White House explained “will provide more efficient financing of authorized trade with Cuba.” And U.S. institutions will now be permitted to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions.

As a major consumer and importer of rice, and once the largest market for U.S. rice, Cuba is uniquely positioned to once again become a major market for the United States, which offers easy logistics for exactly the type of rice Cubans demand.  

The American Soybean Assn. said soybean growers are excited about the promise 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.

“Trade builds bridges between nations, but it also generates real and concreate 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,” said ASA president Wade Cowan.

White House officials and a speech by Obama said the time was now to open up markets to Cuba as “openness is better policy than isolation.”

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