Opening the door to U.S. ag exports to Cuba could reap substantial gains for U.S. farmers, who have lost market share to competitors in Asia and Latin America, according to a new ag trade report.
The report, written by a pair of groups calling for an end to the 1960 trade embargo with Cuba, touted the potential of full access to Cuba’s market for American farmers in six states: Iowa, Alabama, Indiana, Mississippi, Missouri, and North Dakota.
But the chances of Congress choosing to end the embargo are seen as slim. “I don’t see it happening any time soon,” said C. Parr Rosson, agricultural economist at Texas A & M.
The embargo’s ban on credit deals, along with a global drop in commodity prices and the price of U.S. ag products, remain some of the headwinds facing an increase in U.S. ag exports to Cuba, Rosson explained.
“Cuba is very price-sensitive,” Rosson says. “Price is the number one issue.”
As a result, Cuba imports rice from Vietnam, which offers cheaper prices and credit deals.
Food exports to Cuba were halted by the 1960 embargo and didn’t resume until after 2000 under a deal made by the U.S., according to Brian D. Healy, an agricultural economist with USDA.
Since that 2000 deal, known as the Trade Sanctions Reform and Export Enhancement Act (TSRA), the U.S. has exported nearly $5 billion in ag products to Cuba.
And for nine of the last 11 years, the U.S. has had the largest market share of Cuba’s imports.
But that has changed, due to the stronger dollar and increased competition from countries that can provide more flexible payment options. Cuba can only trade with the U.S. on a cash basis, while other countries are offering credit deals, according to Healy.
For example, after gaining 40% of the export Cuban market by 2009, the U.S. share fell to less than 9%, losing out to Vietnam, Argentina and Brazil, according to the report, which was produced by Engage Cuba and the U.S. Agriculture Coalition for Cuba.
In 2015, U.S. ag exports to Cuba dropped to $170 million, a 48% drop compared to the previous year.
And in March 2016, U.S. food exports to Cuba slipped 69%, according to John S. Kavulich, president of the U.S.-Cuba Trade and Economic Council.
But many American producers and elected leaders believe the Caribbean nation represents an important new market for U.S. goods. Along with high-profile trips to Cuba, like the one earlier this year by President Barack Obama, American farmers and ranchers have been traveling to Cuba to establish relationships and to open doors for future trade opportunities, according to Rosson.
“Anything we can do to show good faith and to promote our products helps,” he said. “Texas alone has sent at least five different groups to Cuba.”