Rice Farming

As the potential for open trade between the United States and Cuba increases, rice producers and economists are taking a harder look at the possibilities and potential the reopened market would bring. What they are seeing looks promising, but it is by no means simple.

"We have tremendous advantages as far as logistics and quality, but it is the political situation that is keeping it from happening, not desire of the Cubans not to buy it," says Paul Combs, a Kennet, Mo., rice producer who recently visited the country.

It is that political situation that has prevented rice trade between the two countries for decades.

From 1955 to 1958, Cuba was the leading market for U.S. rice exports, accounting for about 25 percent of total rice exports, according to The Economic Impact of U.S. Sanctions with Respect to Cuba, a U.S. International Trade Commission Publication published in February 2001.

The U.S. trade sanctions imposed on Cuba in the 1950s following the Cuban Missile Crisis forced the country to find alternate rice suppliers. China, Vietnam and Thailand made up that market. Cuba’s own rice production also decreased significantly following the break up of the Soviet Union.

The trade report indicates that, in the absence of sanctions, estimated U.S. exports of rice to Cuba would total $40 million to $59 million annually, based on average 1996-1998 trade data. This would represent 40 percent to 60 percent of Cuban rice imports in the short term.

Estimates are exactly that, and Gene Johnson, Louisiana State University ag economist, says he doesn’t want producers to place too much emphasis on the potential results of open trade.

"I guess my concern is some people feel it will solve all our problems," he says. "I think it will help.We just don’t know the dynamics of what that political situation would be."

Johnson says it’s just like looking at supply-and-demand numbers. Just because there is a perceived need in Cuba doesn’t mean it’s going to happen. And politics will continue to play a large role.

Political dilemmas
Combs traveled to Cuba in the spring of 2000 representing rice producers in Missouri on a trip set up by the U.S. Rice Federation. He agrees with Johnson that politics will remain a key factor with trade negotiations.

The Rice Federation group was composed of millers, producers and one rough rice trader representing all of the rice growing states.

Their mission was to try to get Cuba to buy even a small quantity of U.S. rice under the provisions established by the Trade Sanctions Reform and Export Enhancement Act of 2000.

In their meetings with government officials in Havana, Combs and his group received a standard response across the board.

"Their message back to us was that the sanctions reform that was enacted was not enough," he says. "They still would like to see further reform.

"In other words, they would like to see no sanctions, so they could sell us products to generate cash to in turn buy our products."

Combs says that’s a pretty hard argument to refute, just based on a trade basis with the politics taken out of it. University of Arkansas economist Eric Wailes also believes politics on both sides will have to be settled.

"The fact is the United States is the number one stable exporter of food in the world," Wailes says. "So access to a plentiful and adequate and relatively low-priced food supply is a primary benefit.

"The major downfall is a political one. Castro won’t have anybody to blame on why conditions are so bad in Cuba if you take away the constraints of not being able to trade with the United States."

But Wailes believes the Cuban rice economy is eager to import from the United States.

Logistics
The United States would have several advantages over competitors if open trade were established. China and Vietnam currently are Cuba’s primary rice suppliers, and the United State’s proximity to Cuba would be one advantage.

"One of the problems with the current traders is it takes a couple of months to get it over there, and it needs to come over in large shiploads, which involves logistic problems," Wailes says.

And the United States leads the other suppliers with superior quality rice. "Our price is a little higher on the world market than the Chinese and the Vietnamese," Combs says. "But we have such a huge advantage on logistics, not only in the short distance.

"We can send barge loads of rice to Cuba, whereas the rice coming from Vietnam and China has to be brought in cargo-sized containers."

"There also is only one port that will unload those big cargo ships, and there are multiple ports that can accommodate a barge around the country and can actually get the rice where the people need it." Combs also admits that U.S. advantages are not certain to outweigh the cost differences.

Johnson says he knows of some people in the U.S. Department of Agriculture who believe that, even if the trade sanctions were lifted, the difference in the U.S. price for mill rice may not be able to beat Vietnamese and Chinese prices. He says even though they have higher freight costs and despite the United States’ close proximity,a price advantage might still exist for the other countries.

If the political relationship between the United States and Cuba were different, Combs says he believes Cuba still might buy U.S. rice, even with a higher price tag.

Ag tradeoffs
In studying the political side of open trade between the countries, the effect on other ag markets within the United States is another concern.

Wailes says sugarcane producers, as well as fruit and vegetable producers, likely are content with the current situation between the United States and Cuba.

"I think it’s difficult for the feed grain people to get too excited about that small of a market," he says.

"I think there is some potential pressure coming from the American Soybean Association. Canada right now is providing their [Cuba’s] high protein meal, but the U.S. could certainly be more competitive than that."

Wailes believes the purebred livestock industry, for one, would consider it a major opportunity to get genetics into the Cuban market.

Keep communication open
While there are many other obstacles involved in reaching a smooth trade agreement with Cuba, such as additional legislative and economic constraints, the potential of opening trade can only have a positive effect on U.S. rice producers.

Combs says despite the constraints, he believes keeping the dialogue open now will be vital for the day he believes is coming when the United States will be able to sell rice to Cuba.

"For our market, our prices are at record lows," he says. "It can’t do anything but help."

Uncertain Dynamics The Cuban market looks promising to rice producers, but logistics and politics remain key factors
By Jim Urbanek II Managing Editor
As the potential for open trade between the United States and Cuba increases, rice producers and economists are taking a harder look at the possibilities and potential the reopened market would bring. What they are seeing looks promising, but it is by no means simple. "We have tremendous advantages as far as logistics and quality, but it is the political situation that is keeping it from happening, not desire of the Cubans not to buy it," says Paul Combs, a Kennet, Mo., rice producer who recently visited the country. It is that political situation that has prevented rice trade between the two countries for decades. From 1955 to 1958, Cuba was the leading market for U.S. rice exports, accounting for about 25 percent of total rice exports, according to The Economic Impact of U.S. Sanctions with Respect to Cuba, a U.S. International Trade Commission Publication published in February 2001. The U.S. trade sanctions imposed on Cuba in the 1950s following the Cuban Missile Crisis forced the country to find alternate rice suppliers. China, Vietnam and Thailand made up that market. Cuba’s own rice production also decreased significantly following the break up of the Soviet Union. The trade report indicates that, in the absence of sanctions, estimated U.S. exports of rice to Cuba would total $40 million to $59 million annually, based on average 1996-1998 trade data. This would represent 40 percent to 60 percent of Cuban rice imports in the short term. Estimates are exactly that, and Gene Johnson, Louisiana State University ag economist, says he doesn’t want producers to place too much emphasis on the potential results of open trade. "I guess my concern is some people feel it will solve all our problems," he says. "I think it will help.We just don’t know the dynamics of what that political situation would be." Johnson says it’s just like looking at supply-and-demand numbers. Just because there is a perceived need in Cuba doesn’t mean it’s going to happen. And politics will continue to play a large role. Political dilemmas Combs traveled to Cuba in the spring of 2000 representing rice producers in Missouri on a trip set up by the U.S. Rice Federation. He agrees with Johnson that politics will remain a key factor with trade negotiations. The Rice Federation group was composed of millers, producers and one rough rice trader representing all of the rice growing states. Their mission was to try to get Cuba to buy even a small quantity of U.S. rice under the provisions established by the Trade Sanctions Reform and Export Enhancement Act of 2000. In their meetings with government officials in Havana, Combs and his group received a standard response across the board. "Their message back to us was that the sanctions reform that was enacted was not enough," he says. "They still would like to see further reform. "In other words, they would like to see no sanctions, so they could sell us products to generate cash to in turn buy our products." Combs says that’s a pretty hard argument to refute, just based on a trade basis with the politics taken out of it. University of Arkansas economist Eric Wailes also believes politics on both sides will have to be settled. "The fact is the United States is the number one stable exporter of food in the world," Wailes says. "So access to a plentiful and adequate and relatively low-priced food supply is a primary benefit. "The major downfall is a political one. Castro won’t have anybody to blame on why conditions are so bad in Cuba if you take away the constraints of not being able to trade with the United States." But Wailes believes the Cuban rice economy is eager to import from the United States. Logistics The United States would have several advantages over competitors if open trade were established. China and Vietnam currently are Cuba’s primary rice suppliers, and the United State’s proximity to Cuba would be one advantage. "One of the problems with the current traders is it takes a couple of months to get it over there, and it needs to come over in large shiploads, which involves logistic problems," Wailes says. And the United States leads the other suppliers with superior quality rice. "Our price is a little higher on the world market than the Chinese and the Vietnamese," Combs says. "But we have such a huge advantage on logistics, not only in the short distance. "We can send barge loads of rice to Cuba, whereas the rice coming from Vietnam and China has to be brought in cargo-sized containers." "There also is only one port that will unload those big cargo ships, and there are multiple ports that can accommodate a barge around the country and can actually get the rice where the people need it." Combs also admits that U.S. advantages are not certain to outweigh the cost differences. Johnson says he knows of some people in the U.S. Department of Agriculture who believe that, even if the trade sanctions were lifted, the difference in the U.S. price for mill rice may not be able to beat Vietnamese and Chinese prices. He says even though they have higher freight costs and despite the United States’ close proximity,a price advantage might still exist for the other countries. If the political relationship between the United States and Cuba were different, Combs says he believes Cuba still might buy U.S. rice, even with a higher price tag. Ag tradeoffs In studying the political side of open trade between the countries, the effect on other ag markets within the United States is another concern. Wailes says sugarcane producers, as well as fruit and vegetable producers, likely are content with the current situation between the United States and Cuba. "I think it’s difficult for the feed grain people to get too excited about that small of a market," he says. "I think there is some potential pressure coming from the American Soybean Association. Canada right now is providing their [Cuba’s] high protein meal, but the U.S. could certainly be more competitive than that." Wailes believes the purebred livestock industry, for one, would consider it a major opportunity to get genetics into the Cuban market. Keep communication open While there are many other obstacles involved in reaching a smooth trade agreement with Cuba, such as additional legislative and economic constraints, the potential of opening trade can only have a positive effect on U.S. rice producers. Combs says despite the constraints, he believes keeping the dialogue open now will be vital for the day he believes is coming when the United States will be able to sell rice to Cuba. "For our market, our prices are at record lows," he says. "It can’t do anything but help."
Contact Jim Urbanek at (214) 350-3236 or jurbanek@sbcglobal.net. Hotlinks: The Economic Impact of U.S. Sanctions with Respect to Cuba—USITC Publication 3398, February 2001 ftp://ftp.usitc.gov/pub/reports/studies/pub3398.pdf Cuban Agriculture http://www.cubanag.ifas.ufl.edu/default.htm
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