Expanding trade with Cuba creates opportunities for U.S. farmers, says UF expert

September 15, 2005

GAINESVILLE, Fla. — Cuba’s growing appetite for U.S. food exports is good news for American agricultural producers, but an end to the current embargo on imports from the island nation could mean both challenges and opportunities for Florida agriculture, says a University of Florida expert.

Though no changes in U.S. policy toward Cuba are expected in the near future, the embargo won’t be in place forever, said William Messina, an economic analyst with UF’s Institute of Food and Agricultural Sciences, or UF/IFAS.

“Resuming unrestricted trade and commercial relations with Cuba will provide more opportunities for U.S. agricultural exporters, but Florida growers would face additional competition in markets for crops such as citrus and fresh vegetables,” Messina said.

Cuba’s purchases of food and agricultural products from U.S. firms have grown each year since exporting began in 2001, he said. By 2004, annual sales had increased to nearly $400 million, making Cuba the 25th-largest export market for American food and agricultural products. Since U.S. exports resumed, Cuba has purchased more than 280 products from 37 states, with a total value of almost $1 billion.

“There has been a heavy emphasis so far on grains and poultry meat. Cuba was the third-largest export market for U.S. rice in 2004,” Messina said. “But Cuba also has purchased snack foods, they’ve bought wine and candy. They’ve even bought microwave popcorn and retail packages of pet food.”

Further changes in U.S.-Cuba trade policy also could create lucrative business opportunities for U.S. agriculture in the form of joint ventures or other contract arrangements between U.S. firms and Cuban farming operations, he said.

Investments from other parts of the world could provide better agricultural technology to help improve Cuba’s agricultural output, but these investments are unlikely as long as the U.S. embargo on Cuban imports stands, Messina said.

“In the late 1980s, Cuba had more acreage planted to tomatoes and peppers than Florida, but because of low levels of technology and inefficiencies inherent in its planned economic system, Cuba’s yields in these crops were only about 20 percent of Florida’s,” he said. “Nevertheless, Cuba remains a major potential producer of these and other crops.

“With the proper investments, it wouldn’t take long for Cuban growers to make dramatic strides in increasing crop yields,” Messina said. “But the opportunities for payoffs are limited without the ability to sell to the United States. If the U.S. embargo were lifted, Cuba’s agriculture industry could experience significant growth, in which case investors could see big returns.”

Exports of U.S. food, agricultural and medical products to Cuba are permitted by the 2000 Trade Sanctions Reform and Export Enhancement Act (TSRA), which relaxed a trade embargo that had been in place since 1960, he said. Earlier, the United States counted the Caribbean nation one of its closest trading partners, purchasing nearly three-fourths of Cuba’s exports and providing 70 percent of its total imports.

Though the TSRA legislation took effect in 2000, it was not until November 2001, when Hurricane Michelle caused substantial damage to Cuban agriculture, that the Cuban government began buying food from the United States, Messina said.

The new trade policy has had a positive impact on the U.S. chicken industry, said Bill Roenigk, vice president of the National Chicken Council in Washington, D.C. In the first seven months of 2005, Cuba was the industry’s eighth-largest export market, purchasing 53,000 metric tons, an increase of 40 percent over the same time period the previous year.

“Cuba has indicated that it is more efficient for them to import chicken than to produce it, and they won’t try to provide their own,” Roenigk said. “We expect to see modest growth in the Cuban market for U.S. poultry, as Cuba’s domestic economy develops, and as their tourism industry develops.”

In the meantime, the new law allowing exports to Cuba represents a significant opportunity for U.S. agricultural producers, Messina said. In fact, with the TSRA requirement that Cuba’s purchases be made in cash, there is no credit risk, making Cuba one of the most attractive new markets in the world for U.S. agriculture.

“We are not trying to advocate a policy position in regard to U.S. relations with Cuba,” said Messina, who is part of a team of UF/IFAS agricultural economists that has collaborated with scientists at the University of Havana since 1994 to study the potential impacts of renewed U.S.-Cuban trade.

“Our primary goal is to get objective data on the agricultural and fisheries sectors in Cuba into the hands of U.S. agribusiness firms, legislators, industry associations and other interested parties so they can make informed decisions about the opportunities and challenges a new policy would present,” he said.