Declining U.S. farm exports?

Cuban purchases of U.S. farm products may be dropping. Reporting from the trade fair now under way in Havana, AP notes a Cuban pledge to sign $450 million in contracts with exporters from around the world. Reuters says U.S. food sales are “dwindling,” citing a decline in purchases of U.S. rice (175,000 tons in 2005; 80,000 last year; a similar amount this year) while Cuba planned to sign a contract for 200,000 tons of Vietnamese rice at the event. A purchase of 150,000 tons of Canadian wheat is also expected to displace U.S. sales.

In the Cuban market, U.S. exporters have the advantages of lower shipping costs, price (at times), and convenience, in that Cuba can buy on shorter notice and in smaller lots than it does with more distant trading partners. Other countries’ advantages include an ability to extend credit and to carry out transactions without the cost and complications that U.S. sanctions impose on U.S. sales.

Cuba’s U.S. purchases began at the end of 2001, peaked at $392 million in 2004, and dropped to $351 million in 2005 and $337 million in 2006, according to figures in the U.S. International Trade Commission’s report from last July. (Here’s the press release announcing that report, and the entire report (pdf, 180 pages) is here.)

It may be, as is speculated in the Reuters story, that U.S. actions against international banks that do business with Cuba, and other U.S. sanctions, are taking their toll. For no good reason, Cuba is not permitted to pay U.S. vendors by wiring money directly to their accounts in U.S. banks. Instead the payment must be sent to Europe in Euros, converted into dollars, and paid from a European bank to the U.S. vendor’s account. And only when the payment arrives may the U.S. shipment leave for Cuba. (The USITC report details all this.)

I’ll speculate that there may be another factor at work. Cuban officials had high hopes that, following the opening of agricultural sales, Congress would chip away at other parts of the embargo, with the U.S. agricultural sector leading the charge. It is accepted wisdom among many who follow this issue that the U.S. farm lobby fights fiercely to end the embargo and travel restrictions – but nothing could be further from the truth. American agriculture opposes the embargo but does not work against it, for reasons that have to do with simple self-interest. This has been the case more than ever this year, with the farm bill under consideration in Congress, and with billions in crop subsidies, disaster payments, and other government benefits in play. Bigger fish to fry.

My guess is that Cuba bought American products for sound commercial reasons, and bought a little something extra in the hope that it would energize a key American constituency for change. Cuban officials are realists. With that hope gone, my guess is that the little something extra is gone too.

(Photo of Escambray mountains.)