FarmPolicy

May 30, 2017

Cuba Policy; China (Trade-Biotech); and, the Agricultural Economy

Cuba Policy

Geoff Dyer and Marc Frank reported yesterday at The Financial Times Online that, “The US is to open talks with Cuba about establishing full diplomatic relations and reopening an embassy in Havana, potentially bringing to an end more than five decades of hostility and one of the last vestiges of the Cold War.

“The dramatic move to thaw relations began with a prisoner swap on Wednesday, including three Cuban agents held in US jails and Alan Gross, an American development worker who has been in a Cuban prison for five years on spying charges. The US said an unnamed Cuban man who had provided ‘critical’ intelligence to the US had also been released from a Cuban jail after almost 20 years.”

The FT article explained that, “The push to ease ties with Cuba could bring to an end more than 50 years of US economic sanctions which were put in place just after the Cuban Missile Crisis of 1962 in a bid to isolate the island and contain its ambitions to export communism.”

“‘These 50 years have shown that isolation has not worked. It’s time for a new approach,’ Mr Obama said in a televised address. ‘It does not serve America’s interests, or the Cuban people, to try to push Cuba towards collapse,’ he said. ‘Let us leave behind the legacy of both colonisation and communism, the tyranny of drug cartels, dictators and sham elections.’

US officials said that the administration was relaxing some restrictions on commerce with Cuba, although bigger steps to unwind the embargo would require the approval of Congress,” the FT article said.

Dyer and Frank added that, “Marco Rubio, the Florida senator who is the son of Cuban immigrants, immediately denounced the initiative and said he would work to block efforts at opening trade and commerce with Cuba.”

Peter Baker reported on the front page of today’s New York Times that, “The United States will ease restrictions on remittances, travel and banking, while Cuba will allow more Internet access and release 53 Cubans identified as political prisoners by the United States. Although the embargo will remain in place, the president called for an ‘honest and serious debate about lifting’ it, which would require an act of Congress.”

Humberto Sanchez reported yesterday at Roll Call Online that, “Sen. Marco Rubio, R-Fla., excoriated President Obama’s plan to normalize relations with Cuba and threatened to hold up efforts to confirm an ambassador and fund an embassy…Incoming Senate Majority Leader Mitch McConnell, R-Ky., was also cool to the plan, and he deferred to Rubio, a Cuban-American, on the issue, according to an AP report.

“Rubio also threw cold water on any effort to roll back the embargo, which would require an act of Congress.

“‘This Congress is not going to lift the embargo,’ Rubio said flatly.”

And Niels Lesniewski reported yesterday at Roll Call Online that, “The debate over President Barack Obama’s announced changes in U.S. policy toward Cuba will face a tough test at the Senate Appropriations Committee next year.

“Sen. Lindsey Graham, who is expected to become chairman of the Senate Appropriations Subcommittee on State-Foreign Operations, said Tuesday he would mount an effort to prevent the use of funds for a U.S. embassy to open in Havana.

“‘I will do all in my power to block the use of funds to open an embassy in Cuba. Normalizing relations with Cuba is bad idea at a bad time,’ the South Carolina Republican said Wednesday on Twitter.”

Mr. Lesniewski noted that, “A fact sheet released Wednesday by the White House said the embassy in Cuba would be among the administration’s priorities.”

Meanwhile, Jack Nicas, Ryan Knutson and John W. Miller reported in today’s Wall Street Journal that, “The White House’s move to normalize ties with Cuba could give U.S. companies access to a market that’s been largely off-limits for more than a half century but has less commercial allure than it once did.

“U.S. companies from General Motors Co. to agribusiness giant Cargill Inc. [related news release] to furniture retailer Ethan Allen Interiors Inc. applauded the White House announcement on Wednesday of its move to restore diplomatic relations with Cuba and begin dismantling the embargo in place for 54 years.”

The Journal article noted that, “The news is also good for U.S. farmers, who will be able to export crops to Cuba without harsh restrictions that made trade costly and time-consuming, like requiring buyers to pay in advance. ‘This significantly increases the potential and opportunity, and when that happens American agriculture usually responds positively,’ U.S. Agriculture Secretary Tom Vilsack said [official statement from Sec. Vilsack here].

For U.S. rice farmers, the Obama administration’s move on Cuba opens up market where per-capita rice consumption is around 110 pounds a year, nearly five times the U.S. level, says Greg Yielding, executive director of the Arkansas Rice Growers Association. Cuba once was a ‘major market’ for U.S. rice, with consumers there favoring long-grain varieties cultivated in Arkansas, Louisiana, Mississippi and Texas, Mr. Yielding said. Lately, he said, Cuba’s gotten more of its rice from China and Venezuela.”

Doug Palmer, Helena Bottemiller Evich and Jenny Hopkinson reported yesterday at Politico that, “U.S. Agriculture Secretary Tom Vilsack said reforms announced today by President Barack Obama will make it make easier to sell U.S. farm products to Cuba.

“‘What this particular opportunity creates is a much more efficient, less-expensive opportunity for Cuba to buy American agricultural products,’ Vilsack told POLITICO on the sidelines of the U.S.-China Joint Commission on Commerce and Trade meeting.

“‘In the past, when Cuba was purchasing product, they had to pay cash in advance. They had to route the cash through a third party because we couldn’t allow direct transactions between American banks and Cuban banks,’ Vilsack explained following a session in which he was a presenter.”

The Politico writers pointed out that, “The U.S. has allowed agricultural exports to Cuba since 2001 under the Trade Sanctions Reform and Export Enhancement Act. In 2013, the U.S. exported just shy of $350 million of agricultural goods to Cuba, with frozen chicken, corn, soybeans and soybean meal, as the top products, according to the U.S.-Cuba Trade and Economic Council. Chicken represented nearly half the value, with $144 million in sales. Canned foods, frozen sausages and frozen pork were also among the top 10 products.

“But farm exports to Cuba have fluctuated over the past several years, going as high as $710 million in 2008 after starting off with only $4.3 million in exports in 2001, when trade ties between the U.S. and Cuba were partially liberalized.

“Agricultural trade has been limited by several regulatory and financial hurdles that the Obama administration is aiming to eliminate, including restrictions on cash transactions.”

Andrew Khouri reported yesterday at the Los Angeles Times Online that, “Agriculture exports also will be streamlined, a move hailed by California farm interests.

“‘This is something we long supported,’ said Josh Rolph, a trade specialist with the California Farm Bureau Federation. ‘We stand to gain quite a bit.’”

Chris Clayton reported yesterday at DTN that, “U.S. agricultural exports should become one of the early economic winners under President Barack Obama’s announcement Wednesday to re-establish diplomatic relations with Cuba and ease some trade and travel restrictions with the island.”

Mr. Clayton indicated that, “Cuba has about 11.3 million people, which would rank it slightly below the population of Ohio. Trade with the country has revolved mainly around agriculture and medical supplies. Sales have been up and down over the past decade because restrictions would be lifted then reinstated and then lifted again.

“USDA reports $415.2 million in ag exports to Cuba in 2013 and about $300 million reported so far this year. Frozen poultry products and corn make up more than half the major commodity exports to Cuba in a given year, but soybean meal and distillers grain shipments have increased in recent years.

“Cuba started buying U.S. corn in 2001 and grew those imports, reaching as high as 811,000 tons in the 2007-08 marketing year. However, those corn purchases have dropped steadily ever since. U.S. ag exports to Cuba peaked in 2008 at $710 million, but dropped off in 2010 and have appeared to level off.”

 

Cuba Policy: Lawmaker Reaction

Incoming House Ag Committee Chairman Mike Conaway (R., Tex.)-“The agreement announced today is a poorly negotiated deal for America and for the Cuban people. We have given up significant leverage in exchange for few tangible benefits for our country or the average Cuban. As far as I can see, this deal makes no significant gains on either democratization or increasing respect for human rights in a country where the government controls every single aspect of life.

I have long been a supporter of relaxing agricultural trade restrictions with Cuba and providing humanitarian support for the Cuban people. However, the policies currently in place created advantages that the President has simply given away with this deal and will serve largely to enrich the leaders of Cuba.”

Rep. Conaway also tweeted yesterday that, “The agreement announced today is a poorly negotiated deal for America and for the #Cuban people. The Committee will review this next year.”

Senate Ag Committee Chairwoman Debbie Stabenow (D., Mich.)- “I support the policy changes President Obama announced today because they will boost agriculture, encourage manufacturing, and create jobs in America by increasing our country’s ability to export goods and products, including many made or grown right here in Michigan. I also believe that these actions will serve as the basis for lasting and meaningful political reforms in Cuba that will finally bring freedom to the Cuban people.”

Sen. Chuck Grassley (R., Iowa)- “This policy change is a gift for the Cuban government that has done nothing to provide basic, fundamental human rights to the Cuban people.”

Sen. John Hoeven (R., N.D.)- “With regard to Cuba policy, I am committed to expanding agricultural trade where we can. Easing trade restrictions on selling food to Cuba could have mutual benefits for us and for the Cuban people. At the same time, however, we have to acknowledge that the Cuban government has a record of terrible human rights violations and that we have yet to see any real progress in that regard. If we are going to normalize economic and diplomatic relations with Cuba, the Castro regime needs to first change its approach to human rights.”

Rep. Rick Crawford (R., Ark.)- “While I welcome the restoration of trade between the U.S. and Cuba on behalf of Arkansas agriculture and manufacturers, Congress must proceed with caution and deliberation in response to the president’s decision. I pledge to lend my voice and the voice of Arkansas businesses to what promises to be a thorough and robust debate.”

Rep. Rodney Davis (R., Il.)- “As the second largest exporter in agriculture commodities, Illinois relies on trade relations that allow our products to be sold to the rest of the world. So at a time when America is yearning for more manufacturing jobs and to produce more, improving trade relations with Cuba will only further this goal while helping to empower the people of Cuba.”

Sen. Heidi Heitkamp (D., N.D.)- “To help our farmers do their jobs, we need to make sure they have export opportunities to ship their products around the country and the world. Cuba is a prime market for North Dakota farmers – it imports the vast majority of its food, and there is strong demand for many of the products predominantly grown in our state, both for feeding the Cuban people and its growing agricultural sector.”

Sen. Roy Blunt (R., Mo.)- “I oppose this move, and I believe it is a mistake. It’s hard – if not impossible – to normalize relations with a Castro-led Cuba. And I don’t see anything in the president’s announcement to persuade me otherwise.”

 

Cuba Policy: Additional Background- House Ag Committee

Recall that back in February of 2010, then House Ag Committee Chairman Collin Peterson (D., Minn.) “[I]ntroduced legislation to expand U.S. agriculture exports to Cuba. This bipartisan bill, H.R. 4645, the Travel Restriction Reform and Export Enhancement Act, is co-sponsored by 30 other Members of Congress, including Representatives Jerry Moran of Kansas, Rosa L. DeLauro of Connecticut, and Jo Ann Emerson of Missouri.

“‘Helping feed Cuba is good for the U.S. economy and for the Cuban people. This bill increases the ability of our farmers to sell their products to Cuba just like they do with our other trading partners,’ Chairman Peterson said.

“‘U.S. producers are the closest suppliers that can help meet the food and agriculture needs of the Cuban people. Opportunities to sell to paying customers in Cuba have been hindered by bureaucratic red tape and by arbitrary prohibitions on the ability of U.S. citizens to travel to Cuba. This bill cuts the red tape and allows that trade and travel to happen,’ Chairman Peterson said.”

In a House Ag Committee Business Meeting on June 30, 2010, the Peterson sponsored legislation passed the Committee by a roll call vote of 25 to 20.

Current Ag Committee Chairman Frank Lucas (R., Okla.) and Rep. Conaway both voted “no” on that measure.

For more on this issue, see this FarmPolicy.com update from July 1, 2010.

 

Cuba Policy: Additional Reaction

The Washington Post editorial board indicated today that, “Mr. Obama may claim that he has dismantled a 50-year-old failed policy; what he has really done is give a 50-year-old failed regime a new lease on life.”

The New York Times editorial board noted today that, “Administration officials recognize that Congress is unlikely to take complementary steps toward a healthier relationship with Cuba anytime soon. But this move will inevitably inform the debate about the merits of engagement. In all likelihood, history will prove Mr. Obama right.”

And The Wall Street Journal editorial board stated today that, “What’s striking is how little Cuba had to do for such a major shift in U.S. policy.”

 

China: Trade-Biotech

Gregory Meyer reported yesterday at The Financial Times Online that, “China has approved imports of biotech corn developed by Syngenta, a senior US official said on Wednesday, after blocking the variety last year at a cost of hundreds of millions of dollars to trading houses.

“The decision to allow sales of corn containing the genetically modified Agrisure Viptera trait developed by the Swiss-based crop chemical group could reopen a promising market for US farmers.”

Reuters writer Tom Polansek reported yesterday that, “A top Chinese government official said the country has approved imports of genetically modified Agrisure Viptera corn and two varieties of biotech soybeans after years of review, U.S. Agriculture Secretary Tom Vilsack said on Wednesday.

“Chinese Vice Premier Wang Yang said imports of Viptera corn, known as MIR 162, had been approved by China’s Ministry of Agriculture, Vilsack told reporters at a U.S.-China trade forum in Chicago. The ministry also approved imports of biotech soybeans developed by DuPont Pioneer and Bayer CropScience, he added. Vilsack said he did not know the names of the soybean varieties.”

Reuters writers Michael Hirtzer and Karl Plume reported yesterday that, “Despite molding corn stocks and unreliable alternate suppliers, China is not expected to immediately revive U.S. corn imports following Beijing’s expected approval of a biotech variety responsible for a year-long halt to shipments.”

Also yesterday, Reuters writer Tom Polansek reported that, “With expectations rising that China will soon approve imports of a genetically modified corn variety developed by Syngenta AG, the seed maker dropped a lawsuit against Bunge North America over the agribusiness company’s refusal to handle the controversial grain, court documents show.

“The settlement clears up a long-running legal dispute over Syngenta’s genetically modified Agrisure Viptera corn and probably precedes an eventual decision by Bunge to begin accepting the grain, also known as MIR 162, as the China market opens up.”

Chuin-Wei Yap reported today at The Wall Street Journal Online that, “China’s surprise decision to reverse a ban on imports of a genetically modified strain of corn paves the way for the resumption of what was once a booming market for a byproduct fed to Chinese livestock.

The market for distillers dried grains, which is formed when corn is processed into ethanol, was hit when China late last year halted what would eventually be more than one million metric tons of corn and corn-related imports from the U.S. That corn was found to contain MIR 162, an insect-resistant strain of GMO corn made by Swiss seed maker Syngenta A.G . and exported by U.S. producers. The strain was at the time illegal in China, but permitted in Europe and the U.S.”

The Journal article added that, “U.S. corn exporters may not benefit from China’s latest decision on the matter, analysts say. China is awash in the grain, and early indications are that this year’s corn harvest stands at around 200 million tons, which is roughly the same as last year, they say. The China National Grain and Oils Information Center estimates that some 69 million tons of corn, or about a third of national output, is in state storage.

“‘There is a lot of corn in China’s grain stockpiles, and the question is in fact whether we should continue to store,’ said Hu Huating, an analyst with Zheshang Tianma Futures.

But DDG, as the distilled byproduct is called, could benefit. China doesn’t produce DDG, while the U.S. is the world’s largest exporter of these distillers grains. Chinese DDG imports rose 67% in 2013 to 4 million metric tons, according to customs data.”

 

Agricultural Economy

David Kesmodel and Jesse Newman reported yesterday at The Wall Street Journal Online that, “U.S. wheat prices soared to a nearly seven-month high, fueled by speculation that Russian shipments abroad would fall after the country tightened export rules as it grapples with high food inflation.

“Wheat futures surged 4.1%, the biggest one-day gain on the Chicago Board of Trade since Dec. 1, as traders bet that Russian restrictions could boost overseas demand for U.S. inventories of the grain.”

The Journal article noted that, “Wheat for March delivery jumped 25.25 cents to $6.485 a bushel in Chicago trading, the highest closing price since May 23…[U.]S. corn prices also rose Wednesday, helped in part by gains in wheat. The grains often move in tandem because both are used in animal feed.

“Corn for March delivery added 2.25 cents, or 0.6%, to $4.0825 a bushel.”

Keith Good

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