President Barack Obama's historic trip to Cuba on Sunday could be a game changer for U.S. agribusiness to recapture lost market share. Other industries like tourism also stand to benefit from warmer ties with the island nation.
"Cuba is not going to just come calling to the United States because we're interested in having a normalized relation," said Paul Johnson, co-chair of the U.S. Agriculture Coalition for Cuba, a group of about 120 agricultural organizations and businesses seeking to promote trade ties between the two countries. "They have existing partners with other countries from around the world that they have been doing business for a long time. They won't give those up lightly. We need to compete."
Currently, Cuba imports around 80 percent of its food, representing a market opportunity of approximately $2 billion annually. The value of U.S. exports was around $700 million in 2008 after several hurricanes impacted Cuba, and last year total sales fell below $200 million, according to the U.S. Census Bureau's Foreign Trade program.
The U.S. ag share of the Cuban market peaked at 42 percent in 2009 and by 2014 was down to only 16 percent, according to U.S. government data. The fall in U.S. share is due to credit restrictions imposed on U.S. exporters. Current U.S. law bars American exporters from offering terms of credit, so food or ag products sold to Cuba must be bought on a cash-in-advance basis or through third-party guarantees from foreign banks.
"We certainly have a logistical advantage — I mean we're right here and not a very long sail from ports in Florida or all over the Gulf," said David Salmonsen, senior director of congressional relations for the American Farm Bureau Federation. "There certainly is potential for selling more ag and food products to Cuba. But we really don't have the trade relationships we'd like, especially direct banking relationships so you can offer letters of credit which is the way trade is normally done."
The U.S. once was the leading supplier of bulk commodities, such as rice, wheat and corn, to Cuba. Today, Vietnam is Cuba's largest rice supplier and wheat comes primarily from Canada and the EU. Argentina and Brazil are the largest suppliers of corn to Cuba. In fact, most of Cuba's large ag trading partners, including Canada and France, have provided export credits over the years to Cuba's Alimport, the agency that oversees most food and agribusiness deals.
"Business has really dried up from the U.S. because of the credit issue," said Johnson, the ag coalition co-chair who also is president of Chicago Foods International, a U.S. food distributor focused on exporting to the Cuba market. The Chicago businessman said he plans to be in Cuba for Obama's visit.
U.S. agricultural exports to Cuba could reach $1.2 billion annually if financial restrictions and other barriers are eased, according to Texas A&M University economist Parr Rosson, who provided the estimate in testimony before the Senate Agriculture Committee last year. Experts also see opportunity down the road for Cuba to ship its own agricultural products to the U.S., including honey, coffee, organic sugar and cigars.
The U.S. embassy in Havana reopened in July, and four months later, U.S. Department of Agriculture Secretary Tom Vilsack led a trade mission to Cuba. At a conference last month, Vilsack mentioned Cuba, saying that the U.S. should be "dominating" the pork market there but obviously we're not since Canada and to a lesser extent the EU are Cuba's primary pork suppliers. Vilsack is part of a Cabinet delegation traveling to Havana with Obama — the first sitting U.S. president in almost 90 years to visit Cuba.
"Throughout history, agriculture has served as a bridge to foster cooperation, and I have no doubt that agriculture will continue to play a powerful role as we expand our relationship with the Cuban people in the coming years," Vilsack said in a statement.
In 2014, poultry, meat and related products were nearly half of U.S. ag exports to Cuba, and soybean-related products was another 35 percent of the total in dollar terms. That year Cuba was the eighth-largest export market for U.S. poultry. Still, Cuba represents a relatively tiny market for major pork and poultry producers when compared with Asian markets.
"It's a very small country when you think of only 11 million (people)," said Julie Maschhoff, a vice president for Maschhoffs LLC, a family-owned swine production operation based in Carlyle, Illinois. "Our company produces enough pork for 18 million people, so Cuba is not a huge export opportunity. It is more important for free trade to be re-established so Cubans can enjoy a better standard of living."
Maschhoff, who visited Cuba last year in a trade mission with a group of businesses, said the current "quality of food in Cuba is disastrous. The chicken and pork that we tasted at some of the best restaurants would never be acceptable to American consumers."
She added, "We tasted watermelon that looked lovely in color but had absolutely no flavor because the seeds had been used over and over and over. There had been no new genetic introductions and very little fertilizer. Their food supply has not only dwindled, but it's gone down in quality at the same time."
In addition to a planned bilateral meeting with Cuba President Raul Castro, Obama is expected to engage with ordinary Cubans, including showing his support for the struggling entrepreneurial sector in the Caribbean nation. According to a Brookings Institution study from 2013, restaurants, snack shops, bed and breakfasts, taxis and street vendors of agricultural products are among the most popular entrepreneurial ventures for Cubans.
Some believe the loosening of the trade embargo to Cuba — a nation about 90 miles south of Florida — might encourage the transformation of the communist state to capitalism. In 2000, Congress approved changes in the embargo that allowed the sales of food and medical supplies to Cuba for humanitarian reasons. However, there remain restrictions embedded into the embargo that date to when Fidel Castro seized power in 1959.
There are signs the Havana government is becoming nervous ahead of Obama's visit. Cuban Foreign Minister Bruno Rodriguez on Thursday pledged Cuba would lift its 10 percent tax on cash dollars after the administration eased currency restrictions. At the same time, Rodriguez said "major differences" remain between the two countries, and he insisted that "internal changes in Cuba are absolutely off the negotiating table."