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USDA says Cuba has potential to increase production of sugar cane, coffee, honey, ethanol, rum and tobacco.

Bloomberg, Content provider

November 30, 2016

4 Min Read

by Mario Parker and Marvin G. Perez

For U.S. agriculture companies seeking to help boost Cuba’s production of sugar-cane and other crops, questions over President-elect Donald Trump’s policies loom larger than any fallout from the death of its former leader Fidel Castro.

The demise of the communist ex-president last week at the age of 90 came two years into a gradual thawing of diplomatic and economic ties between the U.S. and Cuba. Trump said Monday in a post on Twitter he will end that rapprochement if Cuba is "unwilling to make a better deal" for citizens in both countries.


With relations easing between the U.S. and the Caribbean country that’s just 90 miles (145 kilometers) south of Florida, there’s been speculation that Cuban farmers could mean fiercer competition for American growers. Cuba was once a major supplier of sugar, fruits and vegetables, and with land untouched by modern chemicals or genetically modified seed, it’s also drawn the attention of organic food producers.

Trump’s team has yet to clarify its position. But while the new administration may not reverse any of the steps taken on Cuba by President Barack Obama, it will probably increase the enforcement of existing regulations, such as border protection and the monitoring of travel, said John Kavulich, president of the New York-based U.S. Trade & Economic Council.

Trump’s approach is “going to be the biggest question that has to be answered,” said Robert Crain, senior vice president and general manager for the Americas at AGCO Corp., a U.S. tractor maker that has been lobbying for access to the Cuban market. “It remains to be seen where he comes out. His presidency is going to have more of an impact on what happens to Cuba than Fidel Castro’s death.”

Crop Exports

The U.S. Agriculture Department says Cuba has potential to increase production of sugar-cane and other crops if foreign investment were to expand. For the marketing years 2012-2013 to 2014-2015, the country’s sugar-cane output averaged 1.6 million metric tons, ranking it 21st in the world, according to a USDA report published last year. Production suffered in the 1990s after the collapse of the Soviet Union, which had bankrolled Castro’s regime.

Cuba also has the potential to boost exports of coffee, honey, ethanol, rum and tobacco products, the USDA says. With a population of 11.2 million, it’s also a significant market for food imports from the mainland. Total agricultural imports have increased 94% over the 10-year period that started in 2004. U.S. agricultural exports to the island averaged $365 million from 2012 to 2014, according to a Sept. 21 report from USDA agricultural policy analyst Mark McMinimy.

Cuba’s total global agricultural exports averaged $526 million from 2012 to 2014, USDA data also show. China is its largest customer.

Also among U.S. agribusinesses eyeing Cuba is Deere & Co., the world’s largest farm-equipment maker, and Archer-Daniels-Midland Co., one of the world’s largest agricultural-commodity traders. If trade relations were normalized, machinery demand would "spike," Crain said in a phone interview Tuesday, citing a trip six months ago as part of a trade delegation to the island, where he saw sugar-cane farmers using antiquated, patched-up AGCO-branded equipment.

Modern, Productive

“As is the case around the world, there is a need in Cuba for modern, productive farm and construction machinery,” Ken Golden, a Deere spokesman, said in an emailed statement. “At this time, we view Cuba as a potential market for John Deere products and services.”

Chicago-based ADM said it’s supportive of greater trade, while warning that hurdles remain. Cargill Inc., one of the world’s largest food producers and agricultural-commodity traders, pointed to the role Cuba can play in an increasingly globalized food system.

"In order to feed a growing population in a safe, affordable and responsible manner, we need intelligent trade policies that open markets and address trade barriers," the Minneapolis-based company said in a statement. "We will work with the new Administration to achieve that"

To be sure, not all U.S. companies are so keen on Cuba, at least while it remains a communist state. Castro’s death was “very bittersweet,” said Leonor Gavina Walls, a vice president for coffee roaster Gavina & Sons Inc. in Vernon, California. The company was founded by her family, who fled Cuba after Castro took power in 1959.

“Our policy is that as long as Cuba is not free, we wouldn’t do any business there," she said.

---With assistance from Shruti Date Singh.

To contact the reporters on this story: Mario Parker in Chicago at [email protected]; Marvin G. Perez in New York at [email protected]

To contact the editors responsible for this story: Simon Casey at [email protected]

Millie Munshi

© 2016 Bloomberg L.P

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