December 26, 2014

 

 

After decades of dissension during and following the Cold War, the US and Cuba are set to revive their relations, a historic development which will benefit US agriculture, the San Antonio Express News reports.

 

President Barack Obama in December this year, there lies the promise of a more open trade with Havana. US Agriculture Secretary Tom Vilsack believes that prices of future agricultural exports will become more competitive in Cuba with the dismantling of trade barriers. 

 

Under the US trade embargo, agricultural exports to Cuba are subjected to complex regulations which include upfront cash payments before shipments. Thus, South America and Asia are the more favoured markets with lesser restrictions and more convenient financings. 

 

Understandably, the resumption of trade relations with Cuba, just 150km from the US mainland, has the support of major organisations like the American Farm Bureau Federation, the National Farmers Union and Cargill Inc.

 

Wheat growers from the American Midwest anticipate new export opportunities.

 

Since 2011, the US virtually did not have a place in Cuba's wheat market. Canada and Europe have been Cuba's key sources of wheat. According to the National Association of Wheat Growers in the US, Cuba could import at least 500,000 tonnes annually.

 

Alan Tracy, president of US Wheat Associates, said the market share of US wheat in Cuba could swell to 80-90% once Havana resumes buying wheat from the US.

 

Parr Rosson III, head of the agricultural economics department at the Texas A&M University, isn't really sure that mere warming of relations between the two countries could have that huge impact on US-Cuba trade, although he believes growth of between US$400 million and US$450 million could be achieved in a few years.

 

But as one of the very few existing socialist states with major poverty issues, Cuba's economy is highly dependent on remittances from citizens based elsewhere in the world and on tourism, he said.

 

Cuba would need liberalised rules in these areas, as well as improved banking regulations and the lifting of the US embargo, before it could provide a jolt in demand to US agriculture, Rosson added.

 

In 2008, US agricultural exports to Cuba were recorded at over US$710 million, according to the US-Cuba Trade and Economic Council. In 2013, they fell by US$360 million to US$350 million.

 

Currently, US chief exports to Cuba are frozen chicken, soybeans and soy products.