Report

Prospects for U.S. Agribusiness in Cuba: Part II

Key Points American agribusiness continues to lose market share to the EU, Brazil, Argentina, and Vietnam due to current U.S. policies. The U.S. now ranks 5th in agricultural exports to Cuba. Cuba’s agricultural imports are expected to grow as increased tourism fuels demand for food products, especially those of higher quality, and as remittances flow more freely due to U.S. policy revisions—all within the context of stagnant Cuban production. If Congress were to change U.S. policy on agricultural exports to Cuba, U.S. exports would be more competitive and able to recapture lost market share. Table of Contents U.S.-Cuba Overview………1 Alabama.……………………2 Iowa…..……………………...3 Indiana...…………………….4 Mississippi….………………5 Missouri...…………………...6 North Dakota………………..7

Report produced by Engage Cuba, in coordination with Brian D. Healy, [email protected] (202) 720-8322, USDA-FAS, Office of Global Analysis, Global Policy Analysis Division. Alternate contact: [email protected]

Key Points • American agribusiness continues to lose market share to the EU, Brazil, Argentina, and Vietnam due to current U.S. policies. The U.S. now ranks 5th in agricultural exports to Cuba. • Cuba’s agricultural imports are expected to grow as increased tourism fuels demand for food products, especially those of higher quality, and as remittances flow more freely due to U.S. policy revisions—all within the context of stagnant Cuban production. • If Congress were to change U.S. policy on agricultural exports to Cuba, U.S. exports would be more competitive and able to recapture lost market share. U.S.-Cuba Overview Cuba imports up to 80% of its food. In 2015, Cuban agricultural imports totaled almost $2 billion, nearly doubling since 2004. Cuba’s main imports include rice (14%), poultry (13%), dairy (12%), soy products (12%), wheat (12%), and corn (9%). The top U.S. agricultural exports to Cuba are poultry, soybean meal, and corn. As a result of U.S. policies, American agribusiness is losing ground to countries who are able to offer financing. The Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000 prohibits U.S. exporters from extending credit to Cuba’s agricultural importers. Consequently, the U.S. fell from its position as the #1 or #2 supplier of agricultural products from 2003 to 2012; the U.S. is now Cuba’s #5 supplier after the EU, Brazil, Argentina, and Vietnam. Significant opportunities exist for American agribusiness in Cuba, from exporters of agricultural commodities and food products to associated industries that will benefit from greater market access. Demand for high quality U.S. agricultural products is driven not only by the increasing purchasing power of 11 million Cubans, but also by remittances and tourism, which are expected to rise dramatically. In order to capitalize, we must change U.S. policy. Value of U.S. Agricultural Exports to Cuba Million USD

U.S. Losing Market Share in Cuba

500 450 400

Sugar & Tropical Products

350

Cotton, Linters & Waste

300

Horticultural Products

250

Livestock & Meats

200

Dairy & Products

150

Grains & Feeds

100

Oilseeds & Products Poultry & Products

50 0 2010 Source: FAS Global Agricultural Trade System (GATS), Global Trade Atlas

2011

2012

2013

2014

2015

Source: USDA FAS, Global Agricultural Trade System (GATS)

*Updated as of May 10, 2016

2

Opportunity Outlook: Alabama Alabama exports to Cuba have considerable room for growth if changes in U.S. policies open opportunities for agricultural trade with Cuba and allow U.S. exporters to extend credit, export and technical assistance, and market development programs. Of Cuba’s nearly $2 billion in agricultural imports in 2015, U.S. agricultural exports totaled $149 million, a 48% drop from 2014. The U.S. share of total exports fell to less than 9% in 2015, down from 40% in 2009. Alabama is the #2 U.S. exporter of poultry, reaching $478 million in broiler meat exports in 2014—almost one-third of the state’s total agricultural export value. In 2015, the U.S. exported $78 million in poultry meat to Cuba—comprising 36% of the market. This represents a significant loss in market share to Brazil, as the U.S. had held an average of 75% poultry market share in Cuba over the last decade. Cuba is consistently a significant export market for U.S. poultry: in 2015, Cuba was the 9th largest market for U.S. poultry exports. As a top poultry exporter, Alabama stands to gain from the increasing trend in Cuba’s poultry imports and recapturing market share from Brazil. Alabama’s other top exports, such as soybeans, wheat, feed and feed grains, will be increasingly important for Cuba’s agricultural imports as its livestock sector develops. In 2015, 12% of Cuba’s agricultural imports were soybean products (meal plus soybean oil), 12% wheat, and 4% feed and fodder. The U.S. used to be a major supplier, but has lost soybean product market share to Argentina and Brazil. Cuba’s Agricultural Imports, 2015

Alabama’s Top Agricultural Exports, 2014

Rice 14%

Other 24%

Poultry Meat & Products 13% Feed & Fodder 4% Soybean Oil 4%

Wheat 12%

Soybean Meal 8%

Corn 9%

Dairy Products 12%

Source: FAS Global Agricultural Trade System

Rank 1 2 3 4 5 6 7 8 9 10

Commodity Broiler Meat (Chicken) Cotton Other Plant Products Other Oilseeds & Products Soybeans Other Livestock Products Wheat Other Poultry Products Beef and Veal Feeds & Feed Grains

Source: USDA ERS

Top U.S. Broiler Chicken Exporters in 2014

Cuba’s Broiler Meat Imports

600

250

500

200 1000 MT

400 300 200

150 100 50

100

Source: USDA ERS

2016

2015

2014

2013

2011

2012

2010

2009

2008

2007

2006

Delaware

2005

Texas

2004

North Arkansas Mississippi Carolina

2003

Alabama

2002

Georgia

2001

0

0

2000

Million $

Value (millions) $478.0 $182.0 $170.3 $117.5 $117.2 $71.2 $69.1 $66.0 $58.8 $39.8

Source: USDA FAS, PSD Database


3

Opportunity Outlook: Iowa Iowa exports to Cuba have considerable room for growth if changes in U.S. policies open opportunities for agricultural trade with Cuba and allow U.S. exporters to extend credit, export and technical assistance, and market development programs. Of Cuba’s nearly $2 billion in agricultural imports in 2015, U.S. agricultural exports totaled $149 million, a 48% drop from 2014. The U.S. share of total exports fell to less than 9% in 2015, down from 40% in 2009. As the #2 exporter of U.S. agricultural products, Iowa stands to gain from a change in U.S. policy toward Cuba. Iowa is a top U.S. exporter of soybeans, soybean meal, and feed grains, all of which will be increasingly important agricultural imports as Cuba’s livestock sector develops in the longer term. Already, in 2015, 12% of Cuba’s agricultural imports were soybean products. The U.S. used to be a major supplier, but has lost soybean product market share to Argentina and Brazil. Opportunities for Iowa to export meat products like pork and beef to Cuba will increase as tourism and remittance growth are expected to fuel demand. Corn, Iowa’s #3 export, presents significant export opportunity. Approximately 9% of Cuba’s agricultural imports are corn. The U.S. was Cuba’s largest corn supplier between 2002 and 2012, with U.S. market share nearly 60% in 2012. However, U.S. corn exports to Cuba have declined precipitously, outweighed by Argentina and Brazil. Changes to U.S. policy on agricultural exports to Cuba would allow Iowa exporters to recapture lost market share. Cuba’s Agricultural Imports, 2015

Iowa’s Top Agricultural Exports, 2014

Rice 14%

Rank 1 2 3 4 5 6 7 8 9 10


Wheat 12% Dairy Products 12%

4.5

KS

ND

OH

0 CA

IA

Source: USDA ERS

IL

MN

NE

TX

IN

Corn Total Imports

Corn Imports from U.S.



4

2015/16

4.5

2014/15

4.7

2013/14

5.7

5

2012/13

6.4

2011/12

7.3

2010/11

7.3

2009/10

9.3

10

2008/09

11.3

2007/08

15

1000 900 800 700 600 500 400 300 200 100 0

2006/07

Billion USD

20

1000 MT

Iowa Rankings for Agricultural Exports: Soybeans & Meal - #2 Corn - #2 Feed - #2 Pork - #1 Beef - #4

2005/06

23.6

Cuban Corn Imports: Lost U.S. Market Share

2004/05

Top U.S. Agricultural Exporters in 2014 25

Value (millions) $3,088.6 $2,325.1 $1,662.1 $1,354.3 $710.4 $409.7 $394.5 $394.1 $377.1 $266.0

Source: USDA ERS

2003/04


2002/03

Corn 9%

Commodity Soybeans Pork Corn Feeds & Feed Grains Soybean Meal Beef & Veal Processed Grains Vegetable Oils Hides & Skins Other Poultry Products

2001/02

Soybean Meal 8%

2000/01

Other 24%

Opportunity Outlook: Indiana Indiana exports to Cuba have considerable room for growth if changes in U.S. policies open opportunities for agricultural trade with Cuba and allow U.S. exporters to extend credit, export and technical assistance, and market development programs. Of Cuba’s nearly $2 billion in agricultural imports in 2015, U.S. agricultural exports totaled $149 million, a 48% drop from 2014. The U.S. share of total exports fell to less than 9% in 2015, down from 40% in 2009. As the #7 exporter of U.S. agricultural products, Indiana stands to gain from a change in U.S. policy toward Cuba. Indiana ranks as the 3rd largest U.S. soybean exporter, totaling more than $2 billion in 2014—35% of the state’s agricultural exports. Soybeans and soybean meal will be increasingly important for Cuba’s agricultural imports as its livestock sector develops in the longer term. Already, in 2015, 12% of Cuba’s agricultural imports were soybean products. The U.S. used to be a major supplier, but has lost market share to Argentina and Brazil. Corn, Indiana’s #2 export, presents significant export opportunity as well. Approximately 9% of Cuba’s agricultural imports are corn. The U.S. was Cuba’s largest corn supplier between 2002 and 2012, with U.S. market share nearly 60% in 2012. However, U.S. corn exports to Cuba have declined precipitously, outweighed by Argentina and Brazil. Changes to U.S. policy on agricultural exports to Cuba would allow Indiana exporters to recapture lost market share. Cuba’s Agricultural Imports, 2015

Indiana’s Top Agricultural Exports, 2014

Rice 14%

Other 24%

Rank 1 2 3 4 5 6 7 8 9 10


Wheat 12%

Soybean Meal 8%

Dairy Products 12%

Corn 9%


Cuban Corn Imports: Lost U.S. Market Share

23.6

TX

IN

ND

OH

Corn Total Imports Source: USDA ERS

Corn Imports from U.S.



5

2015/16

NE

2014/15

MN

2013/14

IL

2012/13

IA

2011/12

CA

2010/11

KS

0

2009/10

4.5

2008/09

4.5

2007/08

4.7

2006/07

5.7

5

2005/06

6.4

2004/05

7.3

2003/04

7.3

2002/03

9.3

2001/02

11.3 10

1000 900 800 700 600 500 400 300 200 100 0

2000/01

15

1000 MT

Indiana Rankings for Agricultural Exports: Soybeans & Meal - #3 Corn - #5 Feed - #5 Pork - #5

20 Billion USD

Value (millions) $2,009.8 $859.6 $702.3 $462.3 $340.0 $256.5 $211.0 $202.0 $189.7 $135.1

Source: USDA ERS

Top U.S. Agricultural Exporters in 2014 25

Commodity Soybeans Corn Feeds & Feed Grains Soybean Meal Pork Vegetable Oils Processed Grains Other Plant Products Other Poultry Products Dairy Products

Opportunity Outlook: Mississippi Mississippi exports to Cuba have considerable room for growth if changes in U.S. policies open opportunities for agricultural trade with Cuba and allow U.S. exporters to extend credit, export and technical assistance, and market development programs. Of Cuba’s nearly $2 billion in agricultural imports in 2015, U.S. agricultural exports totaled $149 million, a 48% drop from 2014. The U.S. share of total exports fell to less than 9% in 2015, down from 40% in 2009. Mississippi is the #5 U.S. exporter of poultry, reaching over $730 million in 2014. In 2015, Cuba was the 9th largest market for U.S. poultry exports, as the U.S. exported $78 million in poultry meat to Cuba—comprising 36% of the market. This represents a significant loss in market share to Brazil, as the U.S. had held an average of 75% poultry market share in Cuba over the last decade. As a top exporter, Mississippi stands to gain from the increasing trend in Cuba’s poultry imports and recapturing the market from Brazil. Mississippi is also the #6 U.S. exporter of rice. Cuba has the highest per capita rice consumption of any country in the Western Hemisphere: about 177lbs per person, compared to 26lbs in the U.S. As recently as 2008, Cuba was an important export market for U.S. rice, but market share has been lost to Vietnam and Brazil, who offer credit to Cuban importers. Some of Mississippi’s other top exports like soybeans, soybean meal, and corn will be increasingly important for Cuba as its livestock sector develops. In 2015, 12% of Cuba’s agricultural imports were soybean products (meal plus soybean oil) and 9% corn. The U.S. used to be a major supplier, but has lost soybean product market share to Argentina and Brazil. Cuba’s Agricultural Imports, 2015

Mississippi’s Top Agricultural Exports, 2014

Rice 14%

Other 24%

Rank 1 2 3 4 5 6 7 8 9 10

Poultry Meat & Products 13% Feed & Fodder 4% Soybean Oil 4% Soybean Meal 8%

Wheat 12%

Corn 9%

Dairy Products 12%

Source: Global Trade Atlas

Commodity Soybeans Broiler Meat (Chicken) Cotton Soybean Meal Corn Other Livestock Products Feeds & Feed Grains Vegetable Oils Rice Wheat

Value (millions) $733.5 $356.2 $300.6 $168.7 $116.6 $108.1 $102.9 $95.4 $92.4 $62.1

Source: USDA ERS

Top U.S. Broiler Chicken Exporters in 2014

Cuba’s Broiler Meat Imports

600

250

500

200 1000 MT

300 200

150 100 50

Source: USDA ERS

2016

2015

2014

2013

2011

2012

2010

2009

2008

0 2007

Delaware

2006

Texas

2005

North Arkansas Mississippi Carolina

2004

Alabama

2003

Georgia

2002

0

2001

100

2000

Million $

400



6

Opportunity Outlook: Missouri Missouri exports to Cuba have considerable room for growth if changes in U.S. policies open opportunities for agricultural trade with Cuba and allow U.S. exporters to extend credit, export and technical assistance, and market development programs. Of Cuba’s nearly $2 billion in agricultural imports in 2015, U.S. agricultural exports totaled $149 million, a 48% drop from 2014. The U.S. share of total exports fell to less than 9% in 2015, down from 40% in 2009. Soybeans, Missouri’s top export at over $1.5 billion in 2014—35% of the state’s agricultural exports—will be increasingly important as Cuba’s livestock sector develops in the longer term. Already, of Cuba’s nearly $2 billion in agricultural imports, 12% are soybean products (meal plus soybean oil). The U.S. used to be a major supplier, but has lost soybean product market share to Argentina and Brazil. Missouri ranks 4th in U.S. state rice exports and 8th for corn exports. Cuba has the highest per capita rice consumption of any country in the Western Hemisphere: about 177lbs per person, compared to 26lbs in the U.S. As recently as 2008, Cuba was an important export market for U.S. rice, but market share has been lost to Vietnam and Brazil, who offer credit to Cuban importers. Corn, Missouri’s #2 export, presents significant export opportunity as well. The U.S. was Cuba’s largest corn supplier between 2002 and 2012, but U.S. exports to Cuba have declined precipitously, outweighed by Argentina and Brazil. Cuba’s Agricultural Imports, 2015

Missouri’s Top Agricultural Exports, 2014

Rank 1 2 3 4 5 6 7 8 9 10

Rice 14%

Other 24%

Poultry Meat & Products 13% Feed & Fodder 4% Soybean Oil 4% Soybean Meal 8%

Wheat 12%

Corn 9%

Dairy Products 12%


Value (millions) $1,518.7 $371.2 $349.3 $330.7 $311.5 $193.8 $179.8 $158.3 $151.4 $150.5

Source: USDA ERS

Top U.S. Rice Exporters in 2014

Cuban Rice Imports: Lost U.S. Market Share

900

7

Imports from U.S.


2014/15


Total Imports

Source: USDA ERS

2013/14

2012/13

Mississippi

2011/12

Texas

2010/11

Arkansas California Louisiana Missouri

2009/10

0

0

2008/09

100

100

2007/08

200

200

2006/07

300

300

2005/06

400

2004/05

400

2000/01

500

500

2003/04

600

600

2002/03

700

700

2001/02

1000 MT

800

800

Million $

Commodity Soybeans Corn Soybean Meal Feeds & Feed Grains Pork Vegetable Oils Beef & Veal Other Plant Products Cotton Wheat

Opportunity Outlook: North Dakota North Dakota exports to Cuba have considerable room for growth if changes in U.S. policies open opportunities for agricultural trade with Cuba and allow U.S. exporters to extend credit, export and technical assistance, and market development programs. Of Cuba’s nearly $2 billion in agricultural imports in 2015, U.S. agricultural exports totaled $149 million, a 48% drop from 2014. The U.S. share of total exports fell to less than 9% in 2015, down from 40% in 2009. North Dakota is the #1 exporter of U.S. wheat as of 2014. Wheat is North Dakota’s primary agricultural export, accounting for 26% of the state total in 2014 at over $1.1 billion. In 2015, of Cuba’s nearly $2 billion in agricultural imports, 12% was wheat. Prior to the U.S. embargo on Cuba, wheat was a major U.S. agricultural export to Cuba. The U.S. had 43% market share in 2009 but has not shipped wheat to Cuba since 2011, having been surpassed by the EU and Canada. Changing U.S. policies would allow North Dakota exporters to recapture market share. Soybeans, feed grains, corn, and soybean meal—North Dakota’s #2, #4, #5 and #6 exports, respectively—will be increasingly important as Cuba’s livestock sector develops in the longer term. Already, 12% of Cuba’s agricultural imports are soybean products (meal plus soybean oil), 9% corn, and 4% feed. As with wheat, the U.S. used to be a major supplier of soybeans and corn, but has lost market share to Argentina and Brazil. Cuba’s Agricultural Imports, 2015

North Dakota’s Top Agricultural Exports, 2014

Rice 14%

Other 24%

Rank 1 2 3 4 5 6 7 8 9 10


Wheat 12%

Soybean Meal 8%

Dairy Products 12%

Corn 9%

Source: Global Trade Atlas

Commodity Wheat Soybeans Other oilseeds Feeds & Feed Grains Corn Soybean Meal Vegetable Oils Other Plant Products Processed Grains Processed Vegetables

Value (millions) $1,151.4 $1,070.3 $581.5 $258.4 $249.5 $246.2 $175.3 $172.4 $157.3 $129.0

Source: USDA ERS

Top U.S. Agricultural Exporters

Cuban Wheat Imports: Lost U.S. Market Share 1200

23.6

1000

North Dakota Rankings for Agricultural Exports: Wheat - #1 Soybeans - #9 Soybean Meal - #9

15 11.3

800 600 400

9.3 200

CA

IA

Source: USDA ERS

IL

MN

NE

TX

IN

Wheat Total Imports

2015/16

2014/15

2013/14

2012/13

OH

2011/12

ND

0

2010/11

KS

0

2009/10

4.5

2008/09

4.5

2007/08

4.7

2006/07

5

2005/06

5.7

2004/05

6.4

2003/04

7.3

2002/03

7.3

2001/02

10

2000/01

Billion USD

20

1000 MT

25

Wheat Imports from U.S.



8