GRAND FORKS — North Dakota and Minnesota are two of the top states in the U.S. to be hurt — or helped — by the openness of U.S.-Cuba trade policies, a recent report says.
A study report was prepared by C. Parr Rosson, head of the department of agricultural economics at Texas A&M University, William Messina, an agricultural economist at the University Florida, and Steven Zahniser, agricultural economist in the U.S. Department of Agriculture.
The economists ranked potential based on commodities, production, demand from Cuba, logistic proximity, historic sales to Cuba and previous diplomatic outreach, including each state's current political leadership with an interest in Cuba.
The projections were largely based on potential sales of a "basket of commodities," including soybeans, soymeal, wheat, corn, poultry, dairy products and rice.
The report relied on data from the USDA, Global Trade Atlas database, U.S. State Export Data, the Massachusetts Institute of Technology Media Lab and the Cuban government. Data was collected from transactions in 2012, 2013 and 2015, and the report was released at the end of November.
Among the conclusions: Cuba imports 60 to 80 percent of its food to feed 11.5 million people. Before the Cuban revolution, Cuba was the ninth largest destination for U.S. farm exports. Cuban citizens have been receiving "increased remittances" that help create a middle class that may lead to more ag imports.
A consensus of economists and Cuba pundits think the U.S. should be able to capture half of the Cuba market and perhaps as much as two-thirds, according to the report.
For example, Paul Johnson, co-chair of the U.S. Agriculture Coalition for Cuba, says the U.S. should be able to capture 60 percent of the Cuban market.
"That is based on logistics," he says.
The U.S. mainland ships $1.17 billion to the Dominican Republic, which has a similar population of about 10.6 million.
Ifs and buts
The report says if the U.S. "does not re-establish a Cold War-era relationship," the U.S. will probably be a major supplier of poultry, soybeans and corn. Without "lifting financing restrictions," it will be difficult to "resume regular shipments" of rice, wheat, dairy products and dry beans. Rossen said that if "all restrictions for agriculture trade with Cuba are lifted" the sales of commodities like soybean and wheat "improves dramatically," but notes that current data doesn't permit "predictability for wheat or rice."
David Schemm, president of the National Association of Wheat Growers, thinks the U.S. could take 75 percent of the Cuban wheat market.
Kevin Paap, president of the Minnesota Farm Bureau, quoted in the study, said increasing the market demand would be important. "If I take my wheat that is $3.10 per bushel and increase the price by 10 percent from new market demand, that is 30 cents more, times 30 bushels per acre, times 3,000 acres. That is exponential."
The study identifies North Dakota and Minnesota among the top in 17 states most likely to benefit from lifting ag sales restrictions, which could generate $500 million to $1 billion in sales.
• North Dakota has exported only $12 million of food to Cuba since 2004. The state produces 54 commodities. "But North Dakota ranks among the nation's top exporters of wheat, soybeans and soymeal, all of which Cuba imports in regularly," the report says. The report notes Cuba imports an average of $189 million of wheat per year from 2005 to 2014. If North Dakota captured its 11.5 percent proportion, it would sell $15 million in wheat in Cuba. If the state kept its 4.6 percent soybean proportion, it would sell $4.7 million to $7.4 million there. The island nation imports about $60 million annually in dry beans, and North Dakota produces about one-fourth of the U.S. output, indicating an $8 million market.
• Minnesota sold $93 million to Cuba from 2004 to 2015, despite the fact that it "aggressively pursued a trade relationship with Cuba." State Agriculture Commissioner Dave Frederickson noted that farmers produce soybeans, soymeal, corn, dairy and wheat that Cuba would want, but acknowledges the state is "up the river" and "a little farther than, say Louisiana," but that the Mississippi River is an advantage. If proportionality counted, Minnesota could also sell $5.6 million in dairy products and $4 million to $6 million in wheat.