The Cuban Market Potential for US Wheat is Strong

(High Plains/Midwest Ag Journal) – Cubans consume a lot of bread. Upwards of 500,000 tonnes of flour per year, it’s estimated. But Cuba, a nation of about 11 million people, cannot grow wheat. That means every single loaf of bread, dinner roll, flatbread or sweet roll comes from imported wheat.

As of 2015, the European Union and Canada were Cuba’s largest suppliers, according to the United States Department of Agriculture Foreign Ag Service. The EU exported $170 million worth of wheat and Canada $67 million worth of wheat.

To compare, from 2004 to 2009, following the Trade Sanctions Reform and Export Enhancement Act of 2000, the U.S. was Cuba’s largest supplier of wheat, on average $260 million worth of wheat per year. The U.S. once had a wheat market share of 43 percent in Cuba as recently as 2009, but the country hasn’t purchased U.S. wheat since 2011.

Juan Jose Leon Vega, official ambassador for the Cuban Ministry of Agriculture, International Affairs, explained the country buys its wheat from France today because the French give Cuba credit.

Because of restrictions under the TSRA, U.S. exporters cannot offer credit. That means exports to Cuba must be purchased with cash or through third-party guarantees from foreign banks, according to the FAS.

It’s that third-party guarantee of credit that sometimes gets in the way, as some in politics and in the industry have shared, concerned that Cuba would honor contracts. As one expert said on the ground, even though the country is poor, it needs to establish credit, so it would be logical for it to honor current and future contracts.

However, U.S. politicians are concerned taxpayers might be on the hook if Cuba couldn’t pay its bills. It’s one of the talking points being hashed out as the talk of lifting the embargo continues on Capitol Hill. In June 2015, Sens. Jerry Moran, R-KS, and Angus King, I-ME, introduced the Cuba Trade Act of 2015, which would permit private businesses to export goods and services to Cuba but would still restrict the use of federal funds to underwrite trade. Tom Emmer, R-MN, and Kathy Castor, D-FL, introduced a similar bill in the House of Representatives.

Wheat is a critical import for Cubans because it’s a staple of their diets. Vega explained the Cuban ration booklets allow for 80 grams of bread per Cuban per day to be purchased at a subsidized rate and that every Cuban can buy as much bread as they want from the parallel marketplaces. With the rising entrepreneurial efforts in the country, there are more bread products offered outside of the state-run bakeries.

“Today we buy our wheat from France because the French give us credit,” he said. “But you have to tell the American farmers that they should talk to (President) Obama so he lifts the blockade. If the blockade is lifted, we will be able to buy a lot of American wheat. The American wheat is very good. We need it.”

Vega said the quality of wheat purchased from the U.S. in the past has been very good, with good sanitary conditions. But it’s the proximity of U.S. ports to Cuba that is important.