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Although most U.S. trade with Cuba has been severely restricted since the 1960s, Cuba does buy limited amounts of agricultural products from the United States, including corn and distiller’s dried grains with solubles (DDGS). The recent decision by the Obama Administration to move toward normalized relations has prompted many in the agriculture sector, including the U.S. Grains Council (USGC), to explore next steps in fully reopening this next-door market.
This week, USGC Chairman Ron Gray and USGC Regional Director of the Western Hemisphere Marri Carrow joined a team from the U.S. Agriculture Coalition for Cuba in an exploratory market assessment visit. The Council asked Gray and Carrow to discuss briefly their experiences.
Q: What is the U.S. Agriculture Coalition for Cuba? Who participates and what are its goals?
GRAY: The Coalition is a diverse group of producer organizations and agribusinesses dedicated to ending the embargo and working for the improvement of agricultural trade between the United States and Cuba. Given its proximity to the United States – just 90 miles off U.S. coast line – Cuba is a natural market for U.S. products. We believe in free trade. It is good for the United States, and it will be good for the Cuban people as their political situation changes in the years ahead.
Q: Normalization of trade with Cuba may be a long process. A lot depends on political developments over which we have no control. Based on your conversations this week, how do you assess the current prospects?
GRAY: Good question. Money and credit are big issues. Cuba is able legally to import U.S. agricultural products now, but the embargo gives Cuba very little opportunity to earn dollars from U.S. tourism or from exports to the United States. Transactions with the United States also have to be on a cash basis, while other countries are able to extend credit. These are changes that could be enacted quickly if legislation is passed. Our immediate objective is building our network of contacts now so that we are able to present U.S. sourcing as the most competitive and reliable option when the conditions are right.
Q: What is the size of the market and what prospects for export growth do you anticipate?
CARROW: Cuba’s corn imports from all sources have increased steadily since 2000, and in recent years have run about 900,000 metric tons (35.4 million bushels) a year. The United States was the dominant supplier until about 2009-2010, but our market share has slipped because our financial regulations make it very challenging for Cubans to buy U.S. agricultural products. Cuba was also an importer of U.S. DDGS but credit issues have impacted us there as well.
The real issue, however, is what will happen over the next 10 years.
Q: What are the major obstacles that must be overcome in the next couple of years to expand U.S. coarse grains sales to Cuba?
CARROW: Ron has already spoken about access to credit. That is a key factor. Income is also a factor. Cuba’s economy was propped up for many years by Soviet subsidies and, after the fall of the Berlin Wall and the collapse of the Soviet Union, the economy contracted by a third or more. Today Cuba has a per capita GDP roughly equivalent to China – a bit higher in some calculations, a bit lower in others. To more fully participate in the global economy, Cuba must find a way to earn foreign revenue. Cuba’s government representatives told us of Cuba’s desired GDP growth of 5 to 7 percent per year. That means Cuba will need to generate an inflow of foreign capital of $2-2.5 billion per year.
Q: The United States enjoys logistical advantages in Cuba, but South American competitors are also active. For corn, U.S. market share in Cuba has declined since a peak in 2007-2008. Should we be optimistic about a recovery once the embargo is lifted?
GRAY: Price matters and transportation is a large component of price. We have an absolute price advantage because of our geography, and there is every reason to believe that we would be a significant supplier of grain to Cuba. We also have a great Cuban-American population that will provide many bridges. At times in the past, the United States and Cuba were great partners, and we could be again.
Q: How does this effort in Cuba fit into the Council’s work on behalf of U.S. farmers in the heartland?
GRAY: When you think about Cuba as a potential market for our products, the images that come to mind are of barriers and walls that separate our two nations. We need to change that picture to a scene of unity. We have had our recent differences, but we are also united by oceans of history. Now is an important moment when our two nations are inaugurating a new era of relations. And while the process will be challenging, political and heavily debated, the Council can help to tear down the mountain that has been built up for more the 50 years and carry out its mission - Building Markets, Enabling Trade and Improving Lives.
Click here to view more photos from this mission.