Thaw In Cuba Policy Could Aid U.S. Agriculture

Thaw In Cuba Policy Could Aid U.S. Agriculture

Iowa farmers find hope in reopening of relations between U.S. and Cuba.

I have a long-time friend who is originally from Cuba. As a child, he escaped with his family from that communist nation years ago, and eventually earned an ag degree from Iowa State University and became a U.S. citizen. Life in that small island country, only 90 miles from the coast of Florida, has always been rough. The long-time reign of dictator Fidel Castro kept Cubans poor. Ever since the days of the Cuban Missile Crisis five decades ago the U.S. hasn't had diplomatic relations with Cuba and has greatly restricted trade with Cuba. Until 2001 there was no trade between Cuba and the U.S.

IT AFFECTS IOWA: The tide is turning after a 50-year history of turbulence. Re-establishing U.S. diplomatic relations with Cuba will hopefully bring normalized trade relations and open up markets in Cuba for U.S. ag products.

Cuba remains a poor, relatively small country. Its economy shifts depending on remittances sent home by Cubans living abroad. Its economy also depends heavily on tourism and nickel exports. Last week's announcement by U.S. President Obama that America will normalize relations with Cuba includes easier terms for selling food, ag commodities and equipment to Cuba. One Obama administration official called it the most significant change in policy toward that country in half a century.

U.S. agriculture supports normalized relations
U.S. agriculture is ready to take advantage of freer trade with Cuba. Farm groups in the U.S. have long regarded Cuba as a natural, nearby customer for American-grown food and ag products.

U.S. ag groups are applauding the Obama administration's decision. The decision was announced Dec. 17 after several months of behind-the-scene negotiations. Obama said the U.S. will reopen its embassy in Havana, expand economic ties with Cuba, and send high-ranking U.S. officials to visit, review Cuba's designation as a state sponsor of terrorism and ease travel restrictions to Cuba. Tourist travel will still be banned, and the embargo will remain until revoked by Congress.

American Farm Bureau president Bob Stallman says improved U.S.-Cuba relations "will expand U.S. farmers' access to a market of 11 million customers for U.S. agriculture."

Iowans find hope in reopening U.S.-Cuba relations
Iowans with ties to Cuba saw Wednesday's announcement of U.S. re-establishment of diplomatic relations as a positive first step for the two countries.


Neil Hamilton, law professor and director of the Agricultural Law Center at Drake University in Des Moines, has been to Cuba six times since 2011. For three of those trips he took some Drake University law students with him. "It's a wonderful process of studying and meeting with Cubans and helping students learn about the history and background of the relations between the two countries," says Hamilton.

Hamilton thinks Wednesday's announcement is historic in that "it's going to put Cuban-U.S. relations on a much different trajectory. I think what president Obama is trying to do and what Cuban president Raul Castro is trying to do is turn a new page, start a new chapter."

Long-standing embargo poses restrictions, hurdles
"With more than 11 million consumers, the Cuban market could prove to be a great opportunity to expand exports of corn and other ag products," says Bob Bowman, a farmer and chairman of the Iowa Corn Promotion Board. He has been to Cuba on an exploratory trade mission with the U.S. Grains Council in the past.

The Iowa Corn Growers Association has an existing policy supporting a renewed trade relationship with Cuba. Although the U.S. has allowed ag exports to Cuba since 2001, the financing restrictions and other hurdles associated with the long-standing embargo have limited U.S. agriculture's ability to be competitive in selling commodities and farm products to Cuba.

Trade sanctions against Cuba have exempted food and ag exports since 2001. But rules on completing transactions (using cash isn't an option, for example, and payments are required in advance) resulted in extra expense and time, complicating shipments of some products.

American farmers to benefit from reopening of trade
U.S. Ag Secretary Tom Vilsack said the shift in relations with Cuba will remove barriers and "create a more efficient and less burdensome opportunity for Cuba to buy U.S. ag products." Those items would become more price-competitive, he said, giving Cubans more options and creating more customers for U.S. farmers.

Bowman is optimistic that freer trade with Cuba will indeed develop and will benefit Iowa and U.S. crop and livestock farmers, as well as U.S. farm equipment manufacturers. During a 2007 trade mission to Cuba with Bill Northey, Iowa Secretary of Agriculture, Bowman says the Cubans were "begging us to open up trade while we were there."


"If this announcement means we're going to open up and lose some of those trade barriers, that's a tremendous opportunity for Iowa corn farmers and agriculture in general to prosper from this," says Bowman. "We have a record crop in the U.S. and another market for our product is indeed an opportunity, especially a market that is only 90 miles away from the U.S. shore."

Progress on working out the details may take awhile
Iowa is our nation's largest corn producer and second largest soybean producer. This year, U.S. farmers are estimated to have harvested 3.958 billion bushels of soybeans and 14.407 billion bushels of corn, both records. Agricultural shipments to Cuba have remained volatile during the last decade, peaking at around $700 million in 2008. In 2013, shipments totaled nearly $350 million, with frozen chicken making up 41% of the figure, according to the U.S.-Cuba Trade and Economic Council. Soybean oil cake, corn and soybeans made up an additional 48%

David Miller, a corn and soybean producer and an economist with the Iowa Farm Bureau says a thawed trade relationship with Cuba is unlikely to noticeably affect U.S. agriculture in the near term, but that as economic conditions improve for the 11 million people living in Cuba, they hopefully will have more income and will become customers for American agricultural products.

The most important thing about Wednesday's announcement is the implications for the Cuban people, says Ray Gaesser, immediate past president of the American Soybean Association and an Iowa farmer. While the U.S. has been able to sell some products in that country for decades, our Cuban customers were unable to secure the same financing and credit opportunities as our other trade partners. The restrictions on financing made it difficult for our products to compete in that marketplace. Easing of these restrictions will make it easier for American crops and livestock products to gain a foothold in that market. But more important, easing of the restrictions will enable the Cuban people to buy the products they need and want as their market develops.

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