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U.S. Agriculture Jumps Back on the Cuba Relations Roller Coaster

U.S.-Cuba relations have been up and down like a roller coaster in the 11 years since the last U.S. wheat export shipment to Cuba. Last week, U.S. Wheat Associates (USW) staff traveled to the island nation as part of a U.S. agricultural conference to see and hear firsthand about trade opportunities – despite frosty bilateral relations.

There is no clearer example of that roller coaster than in the U.S. embassy. After being shuttered for more than a half-century, the embassy was reopened in 2015 during the Obama administration as a sign of goodwill and a hopeful return to a bilateral relationship. Closed in 2017 after never-proven allegations Cuba had perpetrated a “sonic attack” on diplomats, it now operates on a limited basis. Yet relations are so low that the U.S. government has refused to repair recent hurricane damages.

Image shows a meeting in Cuba of the U.S. Agriculture Coalition for Cuba

Cuban Meeting. The U.S. Agriculture Coalition for Cuba sponsored a recent meeting for U.S. agricultural representatives, including USW, with Cuban officials and business interests.

Demanding Respect

That roller coaster in relations continued in the recent conference, where high points about the potential of increased trade and renewed relationships were mixed with harsh rhetoric. Throughout three days of meetings and events with government officials, private business owners and conference attendees, the U.S. delegation repeatedly heard about the harm of the U.S. embargo on Cuba, and especially about tightened measures put into place under the Trump administration. Listing Cuba as a state sponsor of terror and further restricting the ability of U.S. business operations garnered a great deal of ire from the Cuban speakers.

Though conducting business with Cuba is more bureaucratically challenging for U.S. companies than nearly anywhere else on earth, Cuba can and does still purchase some U.S. commodities. The prime example is chicken. Cuba now ranks as a top-three destination for U.S. chicken exports.

Complex Situation

The competitive situation for wheat is much more complex than the products they currently purchase. While the United States has a proximity and logistical advantage over any other wheat supplier, Cuban officials said other countries routinely offer generous credit terms of one to two years. Access to any level of financing has proved particularly important to Cuba, given its relative shortage of hard currency.

Agricultural trade with Cuba was authorized under strict terms with the passage of the Trade Sanctions Reform and Export Enhancement Act of 2000. However, the act required onerous payment terms such as full cash payment in advance of exports, use of third-country banks and travel restrictions on cargo vessels between the two countries. Though that policy sparked sales of U.S. commodities for a few years, the Cuban economy continued to struggle, and those terms have become overbearing. The result has been widespread economic distress for the Cuban people, who are now challenged to secure affordable food. Their stories include bread shortages and state-sponsored food ration supplies being unavailable.

Cuba Needs Wheat

Before COVID, Cuba regularly imported an average of 750,000 metric tons of wheat. That volume would likely make Cuba a top-ten market for U.S. wheat under a normal trading relationship. However, a true “normal” relationship would extend beyond just access to private credit and connections between U.S. and Cuban banking sectors to facilitate trade. For Cuba to reach its full potential as a U.S. commodity export destination, it would likely require the enablement of two-way trade – selling Cuban produce and processed products in the U.S. market. That development would go beyond the agricultural sales provisions of the laws that currently allow one-way trade with Cuba.

End the Embargo

While that may be a worthy goal of opening up to Cuba, in the meantime, U.S. growers need Congress to act. Access to the same payment and shipping terms offered to any other wheat market is a good and reasonable starting point.

The United States has long had a policy of not using food as a weapon. It is past time for us to be honest with our own rhetoric in the case of our closest Caribbean neighbor.

By USW Vice President of Policy Dalton Henry, who represented USW on the trip sponsored by the U.S. Agriculture Coalition for Cuba.

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Only an Act of Congress Can Open the Cuban Wheat Market

It is a country that imports about 800,000 metric tons of wheat each year, a mere 90 miles from the United States. Yet the Cuban wheat market has long been a source of optimism and frustration for U.S. wheat farmers. With the change in administrations, there is hope for re-engagement with Cuba, but ultimately the 60-year-old embargo and associated policies still stand as a solid barrier to beneficial trade.

General public opinion polls on Cuba policy consistently show most Americans favor more engagement, the last decade has seen a roller coaster of changes in U.S. policy. Under the Obama-Biden Administration, there were efforts to establish a new relationship and relax tensions. This included a new interpretation of “cash in advance” rules that apply to payment for any agricultural commodities, bilateral exchanges by technical staff in regulatory agencies and the reopening of the U.S. embassy in Havana. However, none of those changes resulted in actual wheat purchases. Then the Trump Administration further restricted trade by limiting any business conducted between American companies and state-owned companies (such as flour mills) in Cuba.

“Wheat is an important food grain that should be above politics, but the embargo will likely have to end before wheat farmers can help … feed the Cuban people.”

With Biden’s return to the White House, Cuba watchers are anxiously awaiting the next curve in the roller coaster ride and are optimistic the administration will return to the Obama-Biden policy of re-engagement. However, any realistic effort to expand ag trade with Cuba needs to focus on the other end of Pennsylvania Avenue by working to secure meaningful change within the halls of Congress and addressing the bipartisan opposition to trade with Cuba.

Just such a Congressional effort was launched last week by U.S. Senators John Boozman of Arkansas and Michael Bennet of Colorado with the introduction of the Agricultural Export Expansion Act. That bill would allow private financing of agricultural commodities by U.S. companies – a small first step toward normalizing the trading relationship, but an important one to put U.S. companies on a near level playing field when working with Cuban buyers. Several U.S. agricultural organizations including U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) signed a letter of support for the effort as ad hoc members of the United States Agricultural Coalition for Cuba.

More Legislation

The Ag Export Expansion bill is not the only pro-normalization effort within Congress. U.S. Senators Jerry Moran of Kansas, Amy Klobuchar of Minnesota and Patrick Leahy of Vermont, all long-time Cuba trade advocates, earlier this year introduced the Freedom to Export to Cuba Act, which would lift substantial portions of the embargo, including restrictions prohibiting transactions between U.S. and Cuban firms.

Farmers are right to be interested in opening the Cuban wheat market. Cuba produces no wheat domestically and would be a substantial U.S. market if government barriers were to be lifted. But for any of that optimism to come to fruition, it is going to take a literal act of Congress.

“Wheat is an important food grain that should be above politics,” said former USW President Alan Tracy in 2017, “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.”

By Dalton Henry, USW Vice President of Policy

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Diverse Group of U.S. Farmers Visit Cuban Farms, Discuss Future Relationships

U.S. Wheat Associates (USW) is very pleased to see that the grass roots effort to build a lasting, open trading relationship between Cuba is still going strong.

Delegates from the U.S. wheat, soybean, corn, poultry, potato, rice, sorghum and barley industries recently traveled to Cuba to meet with Cuban government officials and farmers. Kansas wheat farmers Doug and Terry Jo Keesling and Kansas Wheat Director of Communications Marsha Boswell represented the wheat industry at the Cuba-U.S. Agriculture Business Conference sponsored by the U.S. Agricultural Coalition for Cuba. The coalition believes that the improvement of agricultural trade between the U.S. and Cuba is the foundation for building successful and enduring relations between both countries.

“The reason I’m here is not to sell potatoes,” said participant Carl Hoverson, CEO of Hoverson Farms, Larimore, N.D., “but to help people live better.”

Boswell reports* that the traditional Cuban diet is made up of rice, black beans, chicken, bread and locally-produced fruits and root vegetables. Much of the food must be imported including an estimated 30 million bushels of wheat the Cuban government currently imports from the EU and Canada. U.S. hard red winter (HRW) wheat is an ideal source for Cuba’s needs, but political choices on both sides related to the long-standing U.S. embargo (known in Cuba as el bloqueo, “the blockade”), prevent that trade.

Under the embargo, Cuba can buy certain U.S. products and may finance the purchases until the products arrive in Cuba, with one exception. Food purchases, which have been allowed since 2000, must be paid in cash up front, before the ships set sail.

Boswell said U.S. Congressman Rick Crawford of Arkansas, spoke to the group about pending legislation that would allow extension of credit terms from U.S. entities to Cuba to purchase food.  Half of the U.S. rice production is grown in his district.

He said, “It’s not about rice; it’s not about wheat; it’s not about chicken. It’s about U.S. ag commodities and market access to areas that have really been difficult for us, and this is a market that I would certainly like to see us participate in.”

After hearing from Cuban government officials who expressed interest in easing trade restrictions with the United States, participants visited a farmer’s market in Havana and toured two farmer cooperatives.

“We are far from reaching our potential. We need technology, modern equipment and timely inputs,” said the president of the first cooperative. For example, Boswell said he noted they know tilling the soil is bad for the land, but that the cooperative does not have the equipment needed to reduce tillage.

While planting genetically modified crops is not yet allowed in Cuba, there is research being done in laboratories. Boswell said Ambassador Juan Jose Leon Vega, Cuban Ministry of Agriculture, International Affairs Division, told the group, “It would be a benefit to the world if it was demonstrated that GMO was safe and could be planted to end hunger. There are 77 million hungry in Latin America.”

Amb. Vega also summarized the position of the Cuban government on trade.

“Farmers in the U.S. and Cuba can have better relationships,” he told Boswell and the other participants. “There is a strong distinction in Cuba between the American government and the American people. We want people to be able to do business together.”

Texas wheat farmer and Vice President of the National Association of Wheat Growers Ben Scholz makes a similar point.

“After visiting Cuba, it is clear that a consistent market for U.S. wheat can be developed in the country,” he said. “With global competition growing rapidly, ending the embargo and easing current regulations that restrict trade with Cuba could provide a much-needed boost for U.S. farmers.”

To read more about USW’s position on trade with Cuba, visit our website at https://www.uswheat.org/policy/trade-barriers/.

*Marsha Boswell’s report on the conference and a list of U.S. participants is posted here: https://kswheat.com/news/2018/11/16/us-farmers-visit-cuban-farms-discuss-future-relationships.

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Hoping for New Opportunities as Castro Steps Down in Cuba

By Ben Conner, USW Vice President of Policy

Cuban President Raúl Castro stepped down this week, closing a six-decade chapter in Cuban history with a Castro leading the communist island nation. During Raúl Castro’s tenure, Cuba’s government has very slowly transitioned to authorize some private sector activity and taken modest steps towards improving relations with the United States.

Hopefully this transition of power will provide an opportunity for a new generation of Cuban leaders to accelerate reforms and further open their country to international trade and investment, while allowing a more free exchange of goods and services between themselves and with U.S. citizens and organizations.

Certainly, obstacles on the U.S. side remain, particularly the outdated trade embargo that prevents most U.S. exporters from assessing and taking their own risks in trade with Cuba. U.S. farmers stand to benefit if the U.S. Congress ends the embargo, which would open the door to the largest Caribbean island wheat market.

Since the most recent President Castro took over from his brother, Fidel, in April 2011, the Cuban government has not purchased any U.S. wheat. At its peak, Cuba was a 500,000 metric ton (MT) market for U.S. wheat, and today it regularly imports around 800,000 MT from other origins. While wheat trade is allowed with Cuba under current U.S. law, other U.S. restrictions make exports cost prohibitive, and the overall embargo poisons the well for any meaningful trade relationship.

This can and should change. U.S. wheat farmers need as many open markets as possible. A leadership transition in Cuba is not a frequent event; let us hope both sides make the most of it.

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Cuba’s Recovery from Another Hurricane Should be Eased by an End to the U.S. Embargo

By Steve Mercer, USW Vice President of Communications

The aftermath of Hurricane Irma is simply stunning. So many of our Caribbean neighbors are facing so much destruction, including in Cuba where the full fury of Irma raked the northern coastline as a Category 5 hurricane that killed at least 10 people and flooded central Havana.

As I read about the damage in Cuba, I could not help thinking about other hurricanes and their impact on our relationship with the island nation.

In 1998, Hurricane Lily hit Cuba hard, too, putting flour mills offline. The Kansas Wheat Commission responded with a generous offer to donate 20 MT of flour to help Cuban people in need. USW helped coordinate the donation, but it had to be made to Caritas, a CARE affiliate non-governmental organization relief organization, not directly to Cuba, because the U.S. government’s embargo prevented them from sending it directly to Cuba.

We believe that the donation did help open some hearts and minds, and the Trade Sanctions Reform Act (TSRA) of 2001 opened exports of wheat and other U.S. agricultural products to Cuba. Yet, the travel and financing restrictions that remained continued to compound the regulatory difficulties of trading with Cuba.

When another hurricane, Michelle, struck Cuba later in 2001, the U.S. government offered aid. The Cuban government refused that offer, but the gesture helped encourage Alimport, Cuba’s food buying agency, to import its first bulk load of U.S. HRW wheat. According to former USW President Alan Tracy, “Cuba’s flour millers and bakers loved that wheat.”

More and more HRW was imported until the annual volume reached almost 500,000 MT, a substantial portion of Cuba’s annual imports of about 800,000 MT.

In 2005, it was not a hurricane, but rather new regulations implemented by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) that interrupted this trade. The changes forced Cuba to obtain and present letters of credit from a third-party, foreign bank, and U.S. exporters had to receive payment only from a third-party bank, rather than through direct payment from Alimport. It was an excessive and unnecessary administrative burden that increased Cuba’s cost of buying U.S. wheat. OFAC also modified the definition of “cash in advance” that required payment before a shipment left a U.S. port rather than before the title changed hands at the shipment’s destination. This rule was unique to our exports to Cuba and removed the ability of Alimport officials to inspect U.S. origin cargo before payment.

Alimport slowed and ultimately stopped importing U.S. HRW wheat completely by marketing year 2011/12.

There was renewed hope when the Obama Administration announced its intention to renew and, eventually, re-open diplomatic relations with Cuba and ease some travel restrictions. Several organizations, including USW, formed the United States Agricultural Coalition for Cuba (USACC) to work together toward more open trade. However, the OFAC rules were never reversed and Cuba continued to import all its wheat from Canada and the EU — no doubt at higher freight rates and likely at higher relative FOB costs.

And, sadly, just hours before Irma struck Cuba, the United States officially renewed its embargo for another year, as required under TSRA.

Cuba’s proximity, as well as historical and cultural ties, should make it a natural trading partner for the United States. The U.S. wheat industry supports easing travel restrictions, permanently overturning the 2005 regulatory changes and increasing access to credit and USDA commercial loan programs. However, the larger political implications of the embargo and its negative effects will likely preclude effective competition by U.S. wheat exporters even if these other changes are implemented.

“Aside from hurting the Cuban people, the embargo has only strengthened the Castro brothers’ grip on power and stymied any change for the better,” Tracy said.

Soon after the most recent hurricane, our organization and other USACC member organizations sent a letter of support and concern to the Cuban people through Cuba’s ambassador. We wrote: “It is at these times when humanity stands together both in fear of the destructive forces of nature that impact us all, and in solidarity in the determination to help one another recover.”

In that spirit, we stand with U.S. wheat farmers to support ending the Cuban embargo entirely.

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Cubans and U.S. Grain Trade Officials Meet to Discuss New Opportunities

By Ben Conner, USW Deputy Director of Policy

This week, a team of Cuban agriculture and trade officials visited the United States to explore the U.S. grain production system at the invitation of the U.S. Grains Council, which asked USW to present information about U.S. wheat trade at a meeting with the officials in Washington, DC.

The Cuban team included representatives from the Ministry of Agriculture, Ministry of International Trade and ALIMPORT, the government agency in charge of grain imports. The group met with wheat farmers from Kansas, Texas and Maryland along with USW staff including Regional Vice President Mitch Skalicky, based in Mexico City. The discussion centered on issues that impede U.S. wheat exports to Cuba. Following meetings in Washington, DC, the Cuban team travelled to Maryland, Missouri and Louisiana to learn more about U.S. grain production, trading and processing.

This was an important opportunity ultimately because trade relationships based on mutual trust may be forged even though political barriers exist. Today, there are still requirements that Cubans must pay cash in advance of receiving U.S. agricultural exports. That requirement does not exist for any other country. In fact, these regulations make all business in the Caribbean more difficult. A baker or miller in a nearby country wanting to sell their products to Cuba pays the shipper more due to of the cost of compliance with U.S. trade laws.

Businesses exporting wheat should be able to make a judgment based on their assessment of political risk. They do it all the time. There needs to be enough trust to ensure the price risk to U.S. exporters is minimized. The arrival of Cuban grain trade officials on U.S. shores demonstrates that Cubans want to reach a position of mutual trust.

Ojalá — hopefully — this U.S. visit by Cuban agriculture and trade officials is a sign of a brighter, more trustworthy future between the people of these two countries that are so close, yet so far apart. If trade and regular interaction with farmers and agribusinesses to the north is given the opportunity to flourish, that day may come sooner

For those interested in more information on the potential of U.S. trade with Cuba, see the U.S. International Trade Commission report released Monday here.

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Air Force One Lands in Cuba

Before this week, Air Force One had never been to Cuba. As the call sign for planes used to transport the President of the United States, Air Force Ones have landed in over 100 countries, but not once in Cuba until this past Sunday. That day marked the start of the first trip by a sitting U.S. president to Cuba since 1928.

President Obama spent three days in Cuba, along with a large delegation of government officials and industry representatives. Most importantly for agriculture, several representatives of the U.S. Agriculture Coalition for Cuba (USACC) made the trip at the invitation of the U.S. Secretary of Agriculture. Representing wheat farmers was Doug Keesling from Kansas.

“We need to put politics aside. It is time for the people of Cuba and the United States to finally be able to meet each other face-to-face,” said Keesling. “Whether we are looking to make deals on wheat shipments or just enjoy each other’s company over mojitos and cigars, we are tired of dealing with these restrictions. It’s time to move on to the next chapter in U.S.-Cuban relations and end the embargo.”

It was an eventful few days for the USACC members, who met with counterparts in Cuban agriculture and participated in events with agriculture leaders from both U.S. and Cuban governments. USACC acted as ambassadors for U.S. agriculture in a country where there has been far too little exposure in decades, even handing out Cuban and American flag lapel pins on the streets.

A lot has happened in the nearly 90 years since a U.S. President last visited Cuba. Most significantly, for U.S.-Cuban relations, revolutionary armed forces led by Fidel Castro deposed the U.S.-backed government in Havana in 1959. Very few U.S. citizens have ever approved of the revolutionary government in Havana or supported its efforts to spread Marxist ideology beyond its shores. Since the end of the Cold War, pronounced ideological differences have persisted, though ideological conflict has largely subsided.

According to public opinion polls, most Americans support repealing the laws collectively known as the Cuba Embargo. Generally, supporters of repeal believe it would be better for both the Cuban and American people if the two countries can trade and interact freely, or at least without obstacles imposed by the United States. Along with President Obama, many Members of Congress – both Republicans and Democrats – support engagement instead of sanctions. Several from both parties accompanied the President this week in Cuba, along with Secretary of Agriculture Tom Vilsack and other Cabinet members.

Cuba is the largest wheat market in the Caribbean, but U.S. exports have dried up completely since 2011. The single largest obstacle preventing the resumption of wheat exports to Cuba is codified in U.S. law and will take an act of Congress to repeal. The embargo must end and the wheat industry will continue advocating for that action.

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USW Lays Down Policy Priorities for Year Ahead

By Ben Conner, USW Deputy Director of Policy

A professor once told me this about achieving goals: “If you don’t write it down, it will never happen.” On behalf of the farmers we represent, USW takes a similar approach to our policy priorities: we write them down for the board to review every year. That happened again last week at the USW Board of Directors meeting in Washington, DC.

USW divides policy goals into three general categories: the World Trade Organization (WTO), free trade agreements (FTAs) and U.S. government policies. USW priorities in all three categories reflect our mission, which is ultimately to enhance the profitability of U.S. wheat producers and their customers.

The WTO category includes both trade enforcement and negotiations. A major policy priority is to ensure that wheat-producing countries follow WTO rules. Right now, a number of major developing countries are blatantly ignoring those rules, costing U.S. farmers in the form of lower exports and prices, and hurting their overseas customers in the form of more expensive domestic supplies. Studies conducted for USW estimated U.S. wheat farmers are losing more than $1 billion in revenue from domestic support policies in just four countries: China, Turkey, Brazil and India. Some of those countries have blatantly ignored WTO import rules in order to protect domestic wheat sectors. That is unacceptable and underscores the need to enforce past trade commitments. Similarly, our board supports negotiations through the WTO that create a more level playing field, but opposes rules that weaken current disciplines in the WTO Agreement on Agriculture or in continued negotiations under the failed Doha framework.

Free Trade Agreements are another priority. If the WTO negotiations remain at an impasse, aggressive market access gains will only come through bilateral regional sectoral trade agreements. The Trans-Pacific Partnership (TPP) is now signed and, hopefully, will soon be ratified by legislatures including the U.S. Congress. Beyond that, the wheat industry is hoping for rapid TPP expansion to other countries in the Asia-Pacific region as well as to new FTA opportunities.

Finally, U.S. government policies also affect U.S. wheat export potential. One of our priorities is on-going funding for the beneficial federal market promotion programs that — along with investment from state wheat commissions — help organizations like USW provide valuable services and information to customers around the world. USW also supports an end to the U.S. embargo of Cuba.

Now that we have written our 2016 Policy Priorities, it is time to make it happen. We are passionate about the profitability of farmers and their overseas customers, so we will be working hard to remove the policy obstacles in the way.

 

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