FarmPolicy

April 20, 2019

Cuba Policy; Trade Issues; Biotech (Labeling); Ag Economy; and, Policy Issues

Cuba Policy

Karen DeYoung and Carol Morello reported on the front page of today’s Washington Post that, “In the wake of President Obama’s historic decision to mend diplomatic ties with Cuba, U.S. businesses and potential tourists scrambled to figure out what new opportunities will be available on the island and to position themselves at the head of the line.

“The political conversation sparked by Obama’s Wednesday announcement grew in both volume and dogmatism. Some hailed the opening as the dawn of pragmatic diplomacy. Others denounced it as a presidential sellout.”

The Post writers explained that, “In news conferences and briefings, the administration provided details of what the new policy means. Trade and tourism will expand, as soon as new regulations can be published in the Federal Register, but the half-century trade embargo will continue to limit both unless Congress decides to lift it.

Reestablishment of formal diplomatic relations, while approved by both countries, requires a formal process that will begin with the visit to Havana next month of Assistant Secretary of State Roberta Jacobson, who is heading the U.S. delegation for previously scheduled talks on migration.”

Today’s article added that, “The George W. Bush administration reduced trade sanctions — allowing export to Cuba of agricultural and medical goods under certain conditions — but tightened visits and remittances to the island.”

More specifically, Julie Creswell reported in the Business section of today’s New York Times that, “Within hours of President Obama’s historic move to restore full diplomatic relations with Cuba, companies in the United States were already developing strategies to introduce their products and services to a market they have not been in for the better part of 50 years — if ever.

“‘Cuba is a potential market for John Deere products and services,’ Ken Golden, a spokesman for Deere & Company, a leading maker of farm and construction equipment based in Illinois, said by email.”

Ms. Creswell explained that, “The Trade Sanctions Reform and Export Enhancement Act of 2000 allowed the sale of unprocessed agricultural products and raw forestry materials by American producers to Cuba, though with strict restrictions. Producers needed to be paid in cash in advance, and payments needed to be funneled through a third-party bank in another country, typically one in Europe.

“Last year, the United States exported $359 million worth of goods to Cuba, compared with a high of $711 million in 2008, according to American government statistics.”

Today’s article added that, “American companies often struggle to compete. Tyson Foods and Pilgrim’s Pride have done a brisk business selling frozen chicken, but sales of grain by Cargill and Archer Daniels Midland have fallen off sharply in recent years because suppliers in other countries, like Brazil, offered cheaper products or allowed their goods to be bought on credit.

“‘This is a wonderful first step, but we would like to see the embargo ended,’ said Devry Boughner Vorwerk, a vice president of corporate affairs for Cargill.

“Congress would need to act to lift the embargo entirely.”

Earlier this week, Reuters writer Karl Plume explained that, “U.S. law exempted food from a decades-old embargo on U.S. trade with the Cuba, but cumbersome rules on how transactions were executed made deals difficult and costly. The U.S. policy shift should eliminate these hurdles.

“‘The policy change is that now payment can be made while goods are in transit, which is the normal course of business, and no longer does the money need to be routed through a third party,’ [Sec. of Agriculture Tom Vilsack] told reporters on the sidelines of a U.S.-China trade meeting.”

Meanwhile, Helena Bottemiller Evich and Adam Behsudi reported this week at Politico that, “U.S. business and agriculture groups say the Obama administration took a huge leap forward with Wednesday’s historic Cuba policy change. But while chicken and rice exports may take off, don’t expect shiny new U.S.-made tractors and lumber to flood Havana anytime soon.

“President Barack Obama’s executive action doesn’t fundamentally change the game, numerous industry sources say. The Cuban embargo and Cuban government remain formidable obstacles for U.S. products and financial transactions.”

The Politico article noted that, “And the new measures only chip away at the sweeping embargo that has kept U.S.-Cuban trade flows at a minimum for more than five decades, trade watchers say. To really go big, Congress would need to be interested in ending the decades-old economic sanctions. But it’s unclear whether farm groups that would gain from such an effort will go to the Hill and fight for Obama’s policy in a newly Republican-controlled Congress.

“‘Certainly there will be agricultural interest groups who will probably carry that banner,’ said Erick Erickson, vice president of the U.S. Grains Council, which doesn’t lobby. ‘I don’t know that this signals a change of mood on the Hill. That’s another chapter in the ongoing saga.’”

Evich and Behsudi added that, “The new financial policy allows U.S. agricultural experts to forgo a longstanding requirement that Cuban companies pay cash in advance for food shipments, usually through a bank in a third country. And U.S. financial institutions will be allowed to set up correspondent accounts with Cuban banks, meaning money could be easily wired to the U.S. company’s account even after the cargo is unloaded in Havana’s port.

“‘What this does is make it more efficient, sufficiently reduces the cost of these transactions, so it’s more likely now that Cuba will able to do business at a higher level from an agricultural product perspective,’ Agriculture Secretary Tom Vilsack said Wednesday.

“The changes are expected to help American farm groups make up ground after decades of crushing financial regulations.”

Bloomberg writer Rudy Ruitenberg reported yesterday that, “The European Union stands to lose a $150-million wheat market in Cuba as the U.S. moves to normalize relations with the island nation after a 50-year embargo.

Wheat is Cuba’s second-biggest import, behind refined petroleum. The country bought 548,756 metric tons of the grain from the European Union in the year through June, with a value of 121 million euros ($149 million), including 356,639 tons from France, Eurostat data show.

The U.S. is the biggest shipper of the grain. Its share of Cuba’s wheat imports could reach as much as 90 percent from zero if the countries re-establish trade relations, U.S. Wheat Associates wrote in a statement yesterday. Under the current embargo, U.S. wheat exporters must use third-party banking institutions that make trade burdensome and often more expensive, according to the lobby group.”

 

Cuba Policy: Lawmaker Reaction

House Ag Committee ranking member Collin Peterson (D., Minn.) spoke yesterday with Joel Heitkamp on the News & Views radio program (KFGO- 790 AM Fargo-Moorhead, N.D.) where the conversation focused on Cuba trade policy.

An audio replay of yesterday’s conversation is available here (MP3- 6:00), while an unofficial FarmPolicy.com transcript of the News and Views discussion is available here.

In part, Rep. Peterson noted that, “Well, it’s what we’ve been trying to do, not 100%, but probably 80% of what we’ve been trying to do for the last number of years with the legislation that we have introduced. So, you know, it’s still not ideal because you’ve got the communist government in charge and you’ve got to do business with them, but it’ll get rid of these provisions that were put in by Bush that said that you had to pay cash before it left the port, and you couldn’t use an American bank, and, you know, those kinds of things. So it should open up, especially for rice and maybe chicken, those two commodities, I think, are going to do very well with this.”

Mr. Heitkamp queried: “When you look at this from a farm market standpoint, what type of timeline are you going to see a difference when it comes to our guys’ checkbooks?”

Rep. Peterson indicated that, “Well, it should be fairly quick because, as I understand it, these restrictions are going to be lifted, and so it should facilitate the sales, you know, and then some of these sales that we’ve lost to other countries, including Canada and others, will come back to the U.S., so it should be relatively quickly.”

Sen. John Hoeven (R., N.D.) was also a guest yesterday on the News and Views radio program with Joel Heitkamp (audio replay –MP3- 9:00; unofficial FarmPolicy.com transcript here).

Sen. Hoeven indicated that, “I mean, I understand making it easier to do the ag piece. That’s something, obviously, we’ve worked on, you know, for a long time. But on the diplomatic side I have real concerns because we’re not seeing any change out of the Castro regime—now it’s Raul Castro—and the human rights abuses continue, the political prisoners, no freedom of speech, obviously no free elections. And I think we’ve got to demand some changes before we normalize diplomatic relations.”

“The question is how do we put pressure on that regime? And when I talk with people like Marco Rubio—and even you saw Bob Menendez, who’s a Democrat, he was chairman of the Foreign Relations Committee, now he’ll be the ranking member—they really feel that this takes pressure off Cuba to change rather than putting more pressure on them,” Sen. Hoeven noted.

Sen. Hoeven pointed out that, “And as I said, on the ag piece, the ag trade piece, I think that there are some things that we can do there that make sense. What I’m concerned about is not demanding and getting some changes on the diplomatic side before we normalize relations, and I think that is a problem… What I’m saying, though, is on the diplomatic part, we have got to demand changes in terms of how, you know, their approach to human rights, and political prisoners, and freedom of speech, and freedom of the Internet and those kind of things before we’re granting them diplomatic status, which is important to them. And that’s the part of this negotiation that I haven’t seen that I think we need. We’ve got to get something for this in terms of trying to open up that country.”

Rep. Mike Pompeo (R., Kan.) was a guest on yesterday’s AgriTalk radio program with Mike Adams (audio replay –MP3- 7:00; unofficial FarmPolicy.com transcript here), where Cuba trade issues were also discussed.

Rep. Pompeo indicated that, “Well, I’m a massive free trade proponent. I was in small business before I went to Congress. We should make sure that Kansas businesses, whether agriculture businesses, or manufacturers, or service providers, have access to markets all around the world. But at the same time, what we’ve got going on in Cuba is a tyrant who expropriated American property, held American prisoners, continues to be, in the Western hemisphere, the most exploitive leadership in that part of the world. And yesterday this President, on his own, made a decision to reward that behavior. We’re very close to having this regime fall, and yesterday he, Castro and his brother—Fidel and his brother Raul were handed a lifeline by the United States President.”

Rep. Pompeo added that, “In Cuba’s case we’re talking about a market of at most 10 or 11 million people who are very poor. Very poor. There’s no middle class that’s going to consume large quantities of Kansas agriculture products sitting in Cuba today. It’s just not the case. What will happen is they’ll say sure, we’ll buy your wheat or your corn so long as the United States government pays for it. This is not a country that there’s this huge opening going to create massive markets for Kansas farmers today, certainly so long as the communist regime remains in place.”

Similarly, Chris Kaergard reported this week at the (Peoria, Il) Journal Star Online that, “However, U.S. Rep. Aaron Schock, R-Peoria, said that based on his travel to Cuba and what he saw of its government-controlled economy, ordinary people there are less likely to benefit than the ruling class.”

Also, Cristina Marcos reported yesterday at The Hill Online that, “Rep. Justin Amash (R-Mich.), a prominent libertarian, said Thursday that he supports re-establishing U.S. diplomatic relations with Cuba.”

 

Trade Issues

In other trade related news, Bloomberg News reported yesterday that, “China’s decision to lift an import ban on some genetically modified crops triggered an immediate jump in purchases of U.S. corn-based feedstock and may spur a recovery in corn shipments by the world’s second-biggest consumer.

“Chinese Vice Premier Wang Yang indicated the Ministry of Agriculture lifted restrictions on several genetically modified crop strains, Tom Vilsack, U.S. Secretary of Agriculture, said yesterday in Chicago, where the two countries are holding trade talks. The approval may lead to a surge in grain shipments from the U.S., according to China-based analysts at Shanghai JC Intelligence Co. and Beijing Orient Agribusiness Consultant Ltd.”

And Reuters writer Tom Polansek reported yesterday that, “Chinese government approval for imports of a controversial type of Syngenta AG biotech corn increases the likelihood the seed maker will pay settlements to more than 100 U.S. farmers and exporters suing for damages from grain shipments rejected by Beijing, lawyers said.”

Meanwhile, George Parker and Shawn Donnan reported this week at The Financial Times Online that, “David Cameron will join industry bodies and other European leaders on Thursday to demand fresh impetus in talks on a transatlantic trade deal amid fears that hopes for an agreement next year are fading.

The UK prime minister will use a European summit in Brussels to try to put ‘rocket boosters’ under the negotiations, which have become bogged down in political wrangling on both sides of the Atlantic.”

 

Biotech- GMO Labeling Issue

As was noted earlier, Rep. Mike Pompeo (R., Kan.) was a guest on yesterday’s AgriTalk radio program with Mike Adams.

In addition to Cuba trade issues, the AgriTalk discussion also focused on biotechnology and food labeling issues; for details on this conversation, see the unofficial FarmPolicy.com transcript of yesterday’s program (audio replay –MP3- 7:00).

 

Agricultural Economy

Christopher Doering reported yesterday at The Des Moines Register Online that, “Farmers, facing multiyear lows in corn and soybean prices and a sharp drop in income, are poised to lower plantings of both crops in 2015, the federal government said Thursday.

“In its outlook for next year, the Agriculture Department said farmers will sow 88 million acres of corn, a decline from 90.9 million acres planted earlier this year. At the same time, soybean plantings will dip 200,000 acres to 84 million acres.”

Note that more details from yesterday’s USDA long-term outlook can be found by clicking on the following sectors: Crop Acreage; Corn; Soybeans; Dairy; and, Livestock.

Philip Brasher reported yesterday at Agri-Pulse Online that, “Farmers are expected to trim their plantings of corn, soybeans, cotton and wheat amid slumping market prices and a steep drop in expected profits, USDA said today in its latest long-term projections.

The cutback would come despite new farm subsidies designed to protect farmers against the falling prices.”

Mr. Brasher added that, “USDA estimates that the average farm-grate price for the 2015 [corn] crop will slip 10 cents to $3.40 per bushel. PLC payments are triggered when the average price is below $3.70.

“Meanwhile, the price of wheat is expected to dip to $5 per bushel for 2015 – down from an estimated $5.90 for this year’s crop – well below the PLC trigger price of $5.50.

“The impact on the federal treasury will vary. Lower commodity prices ‘also translate into lower crop insurance liabilities, premiums and premium subsidies,’ said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri. The price projections are broadly consistent with previous USDA forecasts, he noted.”

The Agri-Pulse article added that, “Economists already are projecting big farm program payments on some of this year’s crops.

“Corn growers are in line to receive $67 an acre under another new program, Agricultural Risk Coverage, or $22 an acre under PLC, based on USDA’s most recent price estimates, according to estimates issued today by economists at the University of Illinois and The Ohio State University. Farmers must choose between the two programs.”

And Jess Newman reported yesterday at The Wall Street Journal Online that, “U.S. grain and soybean futures extended gains Thursday, bolstered by concerns about the world’s wheat supply in light of uncertainty over Russia’s export policy.

“Wheat prices settled higher for the sixth straight session, hitting an almost-seven-month high after Russian news agency Interfax reported that Russia had limited export licenses to boost domestic supplies of the grain and ease food inflation.”

 

Policy Issues

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “USDA’s Risk Management Agency released details Thursday regarding how the Actual Production History Yield Exclusion will work.

“The APH Yield Exclusion is part of the Agricultural Act of 2014 and will be available in spring for barley, canola, corn, cotton, grain sorghum, peanuts, popcorn, rice, soybeans sunflowers and wheat.”

Mr. Clayton pointed to the following resources:

Actual Production History Yield Exclusion Fact Sheet 

Actual Production History Yield Exclusion FAQs

Actual Production History Yield Exclusion Overview of Premium Rating 

Also yesterday, Tess Stynes reported at The Wall Street Journal Online that, “Deere & Co. agreed to sell its crop-insurance business to Farmers Mutual Hail Insurance Co. of Iowa, following a strategic review of the unit that began in September.”

Keith Good

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