If the president is successful in easing longstanding trade sanctions against Cuba, there could be a benefit to farmers in America, especially in the Midwest and South, from selling more food to a country where agriculture is known more for sugar and tobacco.Click here to see more...
"Food has been one of those areas that Cuba has had difficulty producing themselves," said Christopher Hurt, an economist in agriculture from Purdue University.
Indiana Farm Bureau is keeping an eye on the situation due to the potential that always exists to profit from any new market opening up. But, to what extent Hoosier farmers could profit depends on many factors, including how wide the door opens to free trade between the U.S. and Cuba, said IFB spokesman Andy Dietrick.
"You have to wait and see what the rules are going to be. How open those markets are going to be and take it from there,'' said Dietrick.
Hurt said farmers in other midwestern states could also stand to gain, but most of the positive impact potentially from trading with Cuba could be in the Gulf Coast, including states like Texas and North Carolina.
Transportation costs of shipping product from those areas would be lower due to their closer proximity to Cuba and ports in the Gulf of Mexico and Atlantic Ocean for loading barges with large volumes of food destined for the new market, he said.
Hurt speculated most of the exports from Indiana would be from the large chicken, turkey and hog processing operations at Corydon and other places in the southwest part of the state, but any major impact would be several years in the making.
Hurt said there's 11 million people on the island, but the ability to purchase goods within the potential new market is limited right now by a "very low'' average income in that country.
But, over time, greater opportunity for trade with the U.S. would mean Cuba being able to export more of its goods like sugar, tobacco and rum.
And, in return, money derived from those products would raise the disposal income for citizens to afford more goods like meat, vegetables and grain from American farms, Hurt said.
"Those people in developing countries have a high tendency to spend a large percentage of their added income on food," said Hurt, who added more of the protein—rich food like meat and eggs start getting purchased in less fortunate countries that have rising incomes.
Making the impact even more unpredictable is the fact that Cuba, although not blessed with a lot of ground suitable for agriculture, does have "some plowable land" to increase production of its own food, so how much U.S farm products they might be willing to import is anyone's guess, Hurt said.
Dietrick said southern states would have a competitive advantage over Indiana, due to their ability to keep transportation costs down, but Indiana has rivers and other facilities such as the Port of Indiana capable of effectively moving product.
"If there's an open market and we have a product that meets their needs Indiana farmers are going to be there,'' said Dietrick, who feels opening trade more with Cuba would have only a minor impact on Hoosier farmers.
"I don't see that as being a significant market for Indiana product, but you never know. There might be some specialty crops, so you just really have to wait and see what that market is going to look like,'' said Dietrick.
Among those in the agriculture community already giving favor to the president's announcement is the Illinois Soybean Assn. The ISA has been partnering with the Illinois Cuba Working Group to get more grain from that state into the country just 90 miles from the United States.
Duane Dahlman, chairman of the marketing committee for the ISA, said preliminary figures show an initial impact of more than 20 million dollars annually on agriculture in Illinois from loosening trade restrictions as unveiled by the president.
Such a boost would be somewhat low, but any benefit is a plus for farmers and if the trade restrictions are lifted even more as some decision makers have urged then the upside is even greater, said Dahlman.
"That's going to be one of those wait and see's," said Dahlman.
Predicting the outcome is made even more unpredictable by talks already occurring in Congress about trying to block the president from lifting the trade sanctions.