Focus on Cuba

by Chris Lyddon
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Cuba
Heavily dependent on grain imports, the communist country would benefit from increased trade with the United States.
 
Cuba is the largest country in area and population terms in the Caribbean and it relies on imports to feed its population. Trade with its neighbor the United States remains limited and future U.S. policy on selling to the country is unclear.

In its Grain Market Report, the International Grains Council (IGC) put Cuba’s total grains imports at 1.7 million tonnes in 2017-18, unchanged from the year before. Wheat imports are put at an unchanged 800,000 tonnes. Maize imports are put at an unchanged 900,000 tonnes.

The IGC put Cuban rice production in 2017-18 at 400,000 tonnes, unchanged from the year before, while imports are put at 100,000 tonnes, also unchanged.

In a look back at the Obama administration, published in January, ahead of the inauguration of President Donald Trump, U.S. Wheat Associates wrote in its Wheat Letter that “One of the most high profile initiatives affecting wheat was the administration’s reestablishment of diplomatic relations with Cuba and accompanying efforts to reduce the regulatory burdens around trade with that market. Cuba imports no U.S. wheat today, but could be a top 10 market with the end of the trade embargo. Unfortunately, the embargo is still in place and no U.S. wheat has been sold, but these actions to improve relations with Cuba were important first steps.”

According to remarks quoted on the website of the Cuban food ministry, Iris Quiñones Rojas, president of the food industry group GEIA (Grupo Empresarial de la Industria Alimentaria), put wheat flour production at more than 500,000 tonnes and said that it had doubled in the past decade.

According to the 5 de Septiembre website, Cienfuegos Cereales, the largest organization of its kind in Cuba, mills around 40% of the wheat flour consumed in the country. Its production in 2017 is predicted to be 175,000 tonnes. The company has 382 workers and is currently producing around 550 tonnes a day, 50% of its capacity.

Radio Rebelde reported on its owners, the state milling company Empresa Cubana de Molinería, which has two plants in Havana and another in Santiago de Cuba as well as the one in Cienfugos. It quoted the director of the company, María Victoria Rabelo Rodríguez, as saying that the Santiago de Cuba mill has two production lines, one of 350 and another of 250 tonnes capacity.

IMSA (Industrial Molinera de la Habana S.A.) is run by a joint venture operation involving the Cuban government and a Mexican company, Industrial Molinera EX S.A. De CV (IMEX). Its website puts its capacity at 720 tonnes of wheat per day, which represents 350 tonnes of flour and 150 tonnes of semolina per day.

“We are the most modern wheat mill in Cuba,” IMEX said.

Cuba wheat imports
*Projected     **Forecast
Source: U.S. Department of Agriculture.
 

Millers meet Kansas farmers

Cuban millers are keen to import more U.S. wheat and a group from the Cuban flour milling industry visited the Kansas Wheat Commission in September 2016.

“Cuba imports all its wheat needs but is not currently importing any wheat from the United States because of challenges related to the U.S. embargo,” U.S. Wheat said in a report on the visit.

“With current, decade-low commodity prices and pressures on the U.S. ag economy, we need to be fostering trade relationships, not prohibiting them,” said Jay Armstrong, past chairman of the Kansas Wheat Commission and a USW director. “Despite many difficulties associated with the United States trading with Cuba, it is apparent that we have a major transportation and logistical advantage in shipping, given Cuba’s proximity to our ports. A level playing field with Canada and Europe is critical for U.S. wheat farmers to fully realize their export potential to Cuba. Kansas wheat farmers support ending the embargo entirely.”

The Kansas Wheat Commission has been working for decades to open up the Cuban wheat market, including meetings with Cuban leaders and trade missions to the island nation, often in coordination with USW, the report said.

“One of the key reasons that wheat purchases from the United States have not continued is because, under U.S. law, Cuba must pay for all U.S. goods with cash,” U.S. Wheat explained. “Because other competitor countries are able to offer credit to Cuba, U.S. wheat is effectively shut out of the market.”

That is not ideal for Raisner Ramos Vanega, director of balance and delivery from Grupo Empresarial de la Industria Alimentaria (GEIA), and representatives from IMSA. They spoke about their desire to purchase U.S. HRW wheat, it said.

“We have always wanted to buy wheat from the United States, and unfortunately politics have not allowed us to be able to purchase that wheat,” said Amyris Herrera García, quality specialist from IMSA mill.

“Hard red winter wheat is a good wheat,” said José Suarez Linares, quality department supervisor from IMSA, which produces flour, semolina and bran. “Transportation costs are a lot lower and we have had good yields in processing that wheat.”

Armstrong added, “We hope to continue strengthening these relationships and awareness of our purchasing system, so that when the embargo is fully lifted, these friends will have the information they need to successfully incorporate U.S. and Kansas wheat into their milling operations.”

Cuba corn imports
*Projected     **Forecast
Source: U.S. Department of Agriculture.
 

Potential for U.S. trade

The United States was once Cuba’s biggest supplier of a wide range of commodities and the potential for growth is large.

“The United States has huge structural advantages in exporting to Cuba,” a 2015 attaché report said. “Chief among them is location. The United States is less than 100 miles away, meaning lower shipping costs and transit times, especially when compared to current top competitors, the E.U. and Brazil. This is strategically advantageous for the United States since bulk commodities and highly perishable agricultural products can be shipped to Cuba in manageable quantities, overcoming storage and other infrastructure limitations.”

While there is potential for domestic agricultural production and development in Cuba, especially through greater access to inputs and foreign investment, Cuba is expected to continue to rely heavily on agricultural imports, the report said.

“While the United States was formerly Cuba’s dominant supplier of several bulk commodities, including wheat, corn, and rice, U.S. exports of these commodities have declined or, in the case of wheat and rice, disappeared,” the attaché said. “The United States once enjoyed a considerable market share, 43% as recently as FY (fiscal year) 2009, but has not shipped wheat to Cuba since FY 2011. For corn, Argentina and Brazil were the two largest exporters to Cuba in FY 2014, while the United States was third with exports valued at $28 million. The United States was Cuba’s largest corn supplier from FY 2002-2012. U.S. market share reached 64% in FY 2012 but has since declined to just 14% in FY 2014.”

Current U.S. policy on trade with Cuba is not defined.

“After much anticipation that an announcement on Cuba policy changes would be made no later than Saturday, President Donald Trump — in the midst of various political crises — has not decided what to do,” reported the Miami Herald on May 18. “The White House had considered holding an event May 20 to commemorate the 115th anniversary of the birth of the Cuban Republic, but Trump will begin an international trip on Friday and the review of the policy toward the island has not concluded, a spokeswoman told el Nuevo Herald.”

“Havana is confident that not much will happen,” the paper quoted a businessman close to the Cuban government as saying. “The source, who spoke on condition of anonymity, said a drastic change would not make much sense because the Cuban communist government would quickly adjust to a policy of confrontation with its historical enemy, the United States, and because the island is in the throes of a significant transition — the expected retirement of Cuban leader Raúl Castro, 86, in February.”

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