When the White House announced last month that the United States would reestablish diplomatic relations with Cuba, the discussion quickly turned to potential agricultural trade opportunities – including U.S. pork exports.
It is a common misperception that the Cuban market has been closed to U.S. pork due to the longstanding trade embargo. But U.S. pork has actually been entering Cuba for many years, with exports peaking in 2010 at $15.3 million (Cuba’s pork imports from all suppliers peaked in 2006 at $33.4 million). It has been a difficult market for U.S. companies to serve, however, so the changes being pursued by the Obama administration may be a positive first step toward improving Cuba’s business climate.
On Jan. 15, the U.S. Department of the Treasury and the U.S. Department of Commerce announced an initial round of regulatory changes that focus on trade, banking, travel and remittances (Click here for a fact sheet with a summary of regulatory amendments to the Cuba sanctions). Easing the restrictions on financial institutions and changing the regulatory definition of “cash in advance” may help clear the way for more Cuban purchases of U.S. pork, while changes regarding travel and remittances could help improve Cuba’s economy and bolster buying power at the consumer level. Many difficult challenges remain, however.
“When the U.S. industry sells meat products into Cuba there is one state-operated buying entity, Alimport, that controls all purchases,” explains U.S. Meat Export Federation (USMEF) President and CEO Philip Seng. “So this is not the same as marketing pork in other Caribbean markets or in other destinations around the world. There are also challenges with regard to distribution, cold chain management and other aspects of the meat business that are fairly well-developed in many of our Latin American markets, but still have a long way to go in Cuba.”
Seng also notes that the USMEF’s involvement in Cuba has been minimized by restrictions on U.S. Department of Agriculture Market Access Program (MAP) funding and checkoff funding, which cannot be used for the Cuban market. While these policies are likely to be revisited, no changes have yet been announced.
“These restrictions have really limited USMEF’s engagement in Cuba and blocked us from conducting training seminars and other educational activities that have helped us gain traction in similar markets,” he says. “If and when this policy changes, we will have a lot of catching up to do because other suppliers have been more active in Cuba.”
U.S. pork exports to Cuba have trended steadily downward since 2010, and declined sharply last year. Exports were $9.2 million in 2011 and again in 2012, before falling to $8.8 million in 2013. January-through-November exports in 2014 were just $1.3 million, as the United States lost its position as Cuba’s largest pork supplier. Both the European Union ($6.3 million through November) and Canada ($3.4 million) exported more pork to Cuba last year.
Chicken leg quarters have been one of the few U.S. agricultural products to achieve sustained success in the Cuban market, as U.S. poultry exports to Cuba reached $158 million in 2012 and totaled $142 million through November of last year. In addition to its price advantage, U.S. poultry also capitalizes on lower transportation costs because production is concentrated in the southeastern U.S. Cuba’s steady demand for U.S. poultry could be a positive sign for other proteins.
“USMEF certainly sees Cuba as a promising destination for U.S. pork,” Seng says. “But it’s important that we exercise patience and understand all the challenges this market presents. Policy changes on the U.S. side are an important step, but hopefully we’ll also begin to see the emergence of a more robust food industry in Cuba and greater opportunities for economic growth. That will need to happen in order for Cuba to develop in to substantial, reliable market.”
Export data sources: USDA and Global Trade Atlas