Trump’s Cuba rollback brings ag groups concernTrump’s Cuba rollback brings ag groups concern
Changes to Cuba policy tighten export restrictions and create roadblocks in the distribution of goods, complicating agricultural trade with Cuba.
June 16, 2017
During a speech Friday in Miami, Fla., President Donald Trump announced plans to roll back several loosening of restrictions with Cuba and re-institute restrictions on travel to Cuba and U.S. business transactions. The move is being approached with caution from agricultural groups who had hoped trade with the nearby nation could increase.
In January 2016, the Obama Administration loosened export restrictions to allow companies to sell non-agricultural products to Cuba on credit, but legal restrictions on financing agricultural products are still in place. Currently, all U.S. exports to Cuba require cash up front, while other nations around the world offer credit to Cuban importers, in effect preventing farmers and ranchers from being able to ship their products to Cuba.
“Cuba is a $2 billion annual food-import market,” explained American Farm Bureau Federation president Zippy Duvall. “Currently, because of some remaining restrictions, the United States sells about $200 million in agricultural products to Cuba, but that nation represents the kind of growth opportunity America’s farmers and ranchers need during this challenging economic period.”
Groups such as the Farm Bureau and the National Farmers Union (NFU) said when farmers are enduring lower prices and a slide in net farm income, Cuba had the potential to boost exports to the nation just 90 miles away from U.S. shores with 11 million people. NFU said the move “will tighten export restrictions and create roadblocks in the distribution of goods, complicating agricultural trade with Cuba.”
A legislative approach to addressing the embargo is picking up speed. In May, the Senate introduced the bipartisan Freedom to Export to Cuba Act which repeals the current legal restrictions against doing business with Cuba, including the original 1961 authorization for establishing the trade embargo; subsequent laws that required enforcement of the embargo; and other restrictive statutes that prohibit transactions between U.S.-owned or controlled firms and Cuba, and limitations on direct shipping between U.S and Cuban ports. According to the bill’s sponsors, the legislation represents a $2 billion opportunity for U.S. farmers alone.
In February, Sens. Heidi Heitkamp (D., N.D.) and John Boozman (R., Ark.) also introduced a bill to allow private financing of U.S. agricultural exports to Cuba.
“As I saw when I visited Cuba on the previous administration’s historic trip last year, Cuba imports 80% of its food — but right now our farmers are losing out to Brazil, China and Vietnam, which allow financing for agricultural exports to the country,” Heitkamp said.
A joint statement from the U.S. Wheat Associates (USW) and the National Association of Wheat Growers said they’re hopeful that the increasing public and congressional support for more open trade will lead to an eventual end to the U.S. embargo.
“This is a political process and that means there are going to be steps forward and back,” said USW president Alan Tracy. “Our organizations support measures that move toward ending the embargo. Cuba is a significant wheat importing nation and our farmers can supply high-quality wheat at a lower cost than Cuba pays now to import European and Canadian wheat. Wheat is an important food grain that should be above politics, but the embargo will likely have to end before wheat farmers can help meet the increasing demand for agricultural products to help feed the Cuban people.”
Tom Sleight, president and CEO of the U.S. Grains Council (USGC), said the council has worked in Cuba for nearly two decades to help capture grain demand and develop its livestock industry within the confines of U.S. policy. While Trump’s announcement will make USGC’s efforts more difficult – and cost U.S. corn farmers in the short-term, Sleight said the council has every intention to continuing working there to build long-term, mutually-beneficial trade.
In the first eight months of this marketing year, Cuba purchased more than 250,000 metric tons (9.8 million bu.) of corn from the U.S., about 30% of their total demand. “This shows both that Cubans want our product when it's competitive to other origins and that we have significant room for growth given the right policy environment,” Sleight said. “In the past two years, our work in Cuba and with Cuban grain buyers has shown us that the only hindrance to progress there is U.S. policy.”
USGC said the changes announced are concerning because they could cut off these near-term sales while also stymieing the economic development that will drive long-term demand growth. “Neither of those outcomes is favorable for the U.S. ag sector or the Cuban people, who do not have access to sufficient meat, milk and eggs,” Sleight noted.
The National Corn Growers Assn. added allowing the market to go to competitors will cost U.S. corn producers an estimated $125 million in lost opportunity each year. Currently it has just an 11% market share in a country only 90 miles away from the U.S. border.
“Cuba has historically been a 900,000 metric ton (35.4 million bushel) corn market; based on recent export sales, it would be our 11th largest customer if we could capture that demand. Free flow of grain to Cuba could also help us capture sales to the Dominican Republic and even Puerto Rico, an estimated $315 million in lost demand each year,” Sleight added.
Earlier this week, Rep. Rick Crawford (R., Ark.), who has been a supporter of loosening the embargo, wrote an op-ed in the Wall Street Journal stating there was a path forward for the President on Cuba trade that would help American farmers and the Cuban people without repealing the embargo.
“I strongly oppose President Trump’s decision to reinstate a failed, outdated, and isolationist posture towards Cuba. This policy change is not just a missed opportunity for rural America, which would greatly benefit from increased access to the island’s $2B agricultural imports market. This policy shift also poses an unjustifiable risk to our national security, as further U.S. disengagement opens up opportunities for countries like Iran, Russia, North Korea, and China to gain influence on an island 90 miles off our coast,” Crawford said.
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