Missouri's stake in Cuba

Despite economic benefits of trade with Cuba, leaders disagree whether it advances democracy or bolsters Castro’s dictatorship.
Sunday, May 1, 2005 | 12:00 a.m. CDT; updated 4:46 p.m. CDT, Sunday, July 20, 2008

Increasingly, when Cuban families sit down for dinner, the chicken and rice they eat and the milk they drink comes from Missouri.

That’s because American capitalism has crossed the Florida Straits for the Port of Havana in the form of cargo ships full of agricultural goods from big business and small farmers alike. For the past four years, Fidel Castro has been playing political poker, betting he can influence U.S. policy toward Cuba by going to famers and local decision-makers. But now, the Bush administration has raised the stakes, and Missouri farmers could be among the players to lose their chips.

In 2000, Congress approved the Trade Sanctions Reform and Export Enhancement Act (TSREEA) to allow cash-only sale of food and medicine to Cuba for the first time since President John F. Kennedy imposed an embargo in 1962.

Since then, 38 U.S. states have established trade relations with Cuba, with sales nearly doubling every year and reaching $391 million in 2004.

Missouri farmers have eagerly grabbed a piece of that pie, and many experts believe a larger slice remains. Yet, a “clarification” of the law pushed by a vehemently anti-Cuba Bush administration in February is risking a lucrative export market in Cuba.

“Cuba has always been looking for (our dairy products),” said Larry Purdom, a family farmer who has been milking a herd of 140 cows in southwestern Missouri for 43 years. “If the government doesn’t let us be a reliable source, we’ll lose that market — and it’s hard to gain those markets.”

“The bottom line is we’re in a global market,” said Barry Steevens, a dairy specialist at MU’s Animal Science Research Center. “If we didn’t have an opportunity to sell agricultural products to Cuba, then that would have some impact on a lower price to the farmers.”

Steevens said low prices have forced a lot of small family farmers in the Midwest out of business in recent years.

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SIFTING RICE: Farmers in the Bootheel unload their rice at the Riceland processing mill in New Madrid. Missouri’s location along the Mississippi River is beneficial for trade. Rice from the mill can be loaded onto barges and sent to the port of New Orleans for export. (ABRAHAM MAHSHIE/Missourian)

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“Dairy America (a marketing company for dairy co-operatives) reported selling 180 million pounds of dried milk to Cuba under the current system, and now the government is trying to change the system,” said Purdom. He explained that if markets aren’t found for dried milk, the U.S. government will use taxpayer dollars to buy it. In the end, that leads to lower prices for farmers.

The U.S. Treasury Department “clarification” prevents shipments to Cuba from leaving port until payment is held in specially licensed U.S. banks. But those payments must first pass through a third country at a surcharge of roughly 5 percent in addition to processing and paperwork delays.

John Kavulich, president of the U.S.-Cuba Trade and Economic Council, explained that the administration previously allowed up to three days from the time a ship left port for Cuban money to be wired to a bank in Europe, then to the United States. Custody of the goods would not be transferred until U.S. banks possessed the cash.

Kavulich has overseen trade since the first cargo vessel left the Port of New Orleans for Havana in December 2001. Since then, he said, “$790 million (has) moved through the banking system without a hiccup.”

Senate Bill 328, sponsored by a bi-partisan group of 22 mostly farm-state senators, would remove the Treasury Department’s “clarification” and restore the previous arrangement.

U.S. Rep. Sam Graves, R-Mo., is among those in Congress who want to ease trade and travel restrictions with Cuba. “Studies show that Cuba could become a billion-dollar market for agricultural products,” he said in an e-mail interview.

In March, the Missouri Department of Economic Development reported record exports in 2004 of close to $9 billion. Nearly $700,000 of that went to Cuba, a 298 percent increase from the previous year. That means big gains for Missouri farmers of products such as rice. Ed Williams, director of operations for Riceland Foods’ mill in New Madrid, said half of all the rice it processes could be exported.

Charlie Kruse, president of the Missouri Farm Bureau and a staunch Republican on most issues, illustrates the political divide within the GOP on this issue. Kruse took a stance against the administration when he testified last month before the House Agriculture Committee.

“This is a tremendous opportunity for Missouri agriculture,” said Kruse, who represents more than 103,000 farming families. “A lot of the agricultural products they have an interest in, we produce here in the state of Missouri.”

Fred Ferrell, recently appointed by Republican Gov. Matt Blunt to direct the Missouri Department of Agriculture, agrees.

“It could be a great market for produce out of Missouri,” Ferrell said.

Thanks to Missouri’s strategic position along the Mississippi River, the state had strong sales to Cuba before the 1962 embargo.

Propping up a dictator or promoting democracy?

For 46 years, Castro has used a mix of antagonism, nationalism and sacrifice to maintain the support of the Cuban people. By going against a pledge not to buy “one grain of rice” from the United States, Castro also effectively turned several members of Congress whose constituents could benefit into avid proponents.

Missouri’s Riceland Foods made the first agricultural sale to Cuba in November 2001. The rice cooperative sold 12,500 tons of U.S. rice to Cuba after it was processed at the New Madrid mill in Missouri’s Bootheel. At the time, Castro said the purchase was intended to be a one-time deal to replenish supplies lost after a hurricane, but Cuba has since become the No. 5 export market for U.S. rice.

“Trade with Cuba in rice is certainly an important factor for Missouri rice producers,” said Bill Reed, vice president of corporate, community and public affairs at Riceland Foods. The cooperative represents 850 Missouri farmers and 9,000 in the Mississippi Delta region.

“The opportunity in Cuba for U.S. rice, frankly, is significant,” Reed said. “Cuba purchases 600,000 metric tons every year from the world rice market. If trade with Cuba is normalized, you would expect a significant increase in exports from the U.S.”

U.S. Rep. Jo Ann Emerson, R-Mo., who has joined the fight for normalized relations with Cuba, believes a boost in trade would also bring a turn toward democracy in the island nation. Emerson recently submitted House Bill 719, a toned-down version of the Senate bill that would overturn the Bush “clarification.”“I believe that trade is a fundamental vehicle for diplomacy, and the best way to introduce democracy to the people of Cuba is through travel and trade to that nation,” Emerson said in an e-mail interview.

Opponents, however, say Castro is abusing the humanitarian goals of the TSEERA by using food purchases for profit in the tourist industry and by buying congressional votes to strengthen his government. That’s because some of the purchased food is sold to tourists at high profit instead of at low cost to help Cuban citizens. The Cuban government also selectively purchases agricultural goods from U.S. congressional districts, then asks members of Congress to sign letters stating they will work to change U.S. policy toward Cuba.

“They’re getting political points in the American heartland,” said Tom Suber, president of the U.S. Dairy Export Council in Washington, D.C. “Cubans know what they’re getting when they buy…Through economics they’re trying to change the politics, and we agree.”

Suber said some of our exported food is made available to Cubans at subsidized prices while some is sold only in restaurants and hotels where Cuban citizens aren’t permitted. “Agricultural products have both a humanitarian purpose and go to the tourist industry — they’re two sides of the same coin.” Cuba’s political agenda is no secret. That’s why the State Department stopped granting marketing visas to Cuban state officials who often met with representatives and held news conferences in an effort to change U.S. policy.

“It doesn’t affect Cuba’s buying,” Kavulich said of the visas. “Cuba is still buying.”

And they’re buying in cash. Kavulich said U.S. agribusiness representatives attending a food show in 2002 learned Cuba was defaulting on its payments to Europe and Asia to the point of more than $12 billion but paying all its U.S. bills on time.

Yet, because of the Bush administration’s recent ratcheting up of tough policies on Cuba, farmers such as Purdom fear export markets could dry up. A similar situation hit rice growers earlier this month when Vietnam agreed to provide Cuba with 425,000 metric tons of rice in 2005 — far more than the United States was providing.

“I don’t think those folks in Washington understand,” Purdom said, noting that a shortage of powdered milk on the world market gave the United States a selling advantage in the world market because of a relatively high domestic supply. Cuba’s proximity and eagerness to buy make it an obvious prime customer.

“We have to find a home for agricultural goods,” Kruse said. “About 25 percent of what we produce has to find a home in a market outside of the U.S.”

Cubans represented the biggest buyer of rice before the embargo, but now they purchase most of their rice from southeast Asia, where quality is lower and the shipping cost is 30 percent higher, Kruse said.

“I fail to see the logic, especially when a market for U.S. agriculture is so close,” Emerson said. “We have a golden opportunity to influence the democratization of Cuba after the death of Castro, but instead of opening a dialogue with Cubans, we have closed many doors.”

A waiting game?

The potential boon to U.S. agriculture, and to Missouri farmers, will be enormous once Castro is gone.

“We’re ready as an agricultural organization to hit the ground running,” said Lowell Mohler, former director of the Missouri Department of Agriculture. “I think it’s a waiting game — when things happen with Congress and with the Cuban government.”

Kavulich agrees. “President Castro’s death will have an effect, as much of U.S. policy toward Cuba is Castro-centric,” he said. “It’s quite likely there will be less opposition. Much depends on whether it results in a transition or a succession.”

But waiting, many farmers and agribusiness experts say, means losing market share and weakening trade relations that have improved in the past four years.

“Put it this way, we’ll continue to make progress even with Castro still there,” Kruse said. He said Castro is a problem, but advances can still be made, especially if Cuba is opened to American tourists.

“Most of the tourists in Cuba are Europeans or Canadians,” Suber said. “Their interests are to see their products. If the travel ban is lifted, there’s reason to believe a lot of Americans will go down there and build (the Cuban) economy. We could see our products increase sharply.”

Tourist industry products mean more expensive cuts of meat, processed foods and value-added goods, not just the grains that comprise most of Cuba’s purchases. But Kavulich doubts we’ll see big gains overnight.

“The argument is that when U.S. visitors go to Cuba, they will spend money, and then Cuba will get more,” he said. “But it would take years to get any substantive numbers.”

Kavulich said Cuba lacks the modern tourist infrastructure that exists in other Caribbean destinations. Hotels, for example, are already at 70 percent occupancy without American tourists.

Small farmers or big business?

Purdom, who has been milking cows in the Ozarks for more than 40 years, has survived despite devastatingly low milk prices in 2002 and 2003 that caused many dairy farmers to sell their land or leave the dairy industry.

A short drive through the Purdy countryside provides evidence of the loss. “Everywhere you look this country is beef cattle now,” Purdom said. “Thirty years ago they were all Holsteins.”

Missouri continues to lose dairy farmers at a rate of 10 percent a year, leaving the rolling hills of southwest Missouri dotted with abandoned dairy barns. Today 1,777 dairies remain in the state.

As chairman of the Missouri Dairy Association and of his local dairy political action committee, Purdom has helped keep many dairy farmers afloat. He also says he has a lot of faith in newly elected Gov. Blunt, who, he says, has a soft spot for agriculture.

But it’s unclear whether U.S. agribusiness giants might be in a better position than small farmers to influence legislative changes and tip the balance in their favor.

“Approximately 15 companies are doing approximately 90 percent of the business. Three account for about 70 percent,” Kavulich said. “Farmers don’t export. If you have a farmer with 500 acres of corn, he doesn’t go around exporting to people.”

Farmer-owned cooperatives such as Purdom’s do export, but often giant agribusiness corporations can do this more efficiently. They employ better lobbyists in Washington and undercut the co-ops in price. When it’s no longer in Cuba’s strategic interest to buy from diverse sources, co-ops might be the first to lose.

“Recently, you had these farmers going to Cuba — it’s ridiculous,” said Kavulich, referring to local farmers who visited in hopes of increasing their share of trade with the island.

“They should be going to Illinois, Iowa and Indiana to lobby the executives of Archer Daniels Midland, Cargill and FC Stone.”

Archer Daniels Midland and Cargill executives did not return calls requesting interviews to discuss their role in increasing the market share for small farmers, and Missouri’s Farmland Foods executives declined to comment.

“A lot of politicians use Cuba for publicity,” Kavulich said. He said representatives often mention or visit Cuba in association with gains to local farmers. However, most gains go to large corporations, not to the small farmers the representatives speak to.

Still, Missouri farmers such as Purdom believe in the power of their co-ops and their ability to keep family farms competitive by finding and keeping export markets.

“Farmers are eternal optimists,” Purdom said, but “sometimes the government makes a law that goes further than it intends to.”

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