Seeds of hope
Will a thaw in U.S. relations help boost Virginia’s sluggish farm exports to Cuba?
Of all the changes to official U.S. relations with Havana that President Barack Obama announced in December, Virginia’s Secretary of Agriculture and Forestry Todd Haymore thinks the new power of U.S. banks to deal directly with their Cuban counterparts may be the most important to boost the state’s level of farm exports to the island nation.
Nearly 15 years ago, the George W. Bush administration relaxed portions of the 55-year-old American trade embargo against Cuba to allow tightly regulated exports of U.S. food and farm products. U.S. agribusiness companies, however, have been forced to use third-party banks — usually based in Canada or Europe — to act as financial intermediaries on these exports.
For many potential exporters in Virginia, fees charged by these foreign banks made the overall cost of selling products in Cuba unprofitable, Haymore says.
“The biggest removal of a barrier to entry [to Cuba], in my opinion, is that financial institutions in the United States will now have direct banking ties with Cuban banks in order to facilitate financial transactions as it relates to exports,” Haymore says. Under the current system, “the only winner is that third-party bank in Europe or Canada.”
Haymore describes the third-party bank fees as “another transaction that adds no value to the crop or the commodity, yet it adds a cost to the crop or commodity. I can’t put a dollar figure on it, but it makes products from Virginia and the United States a little more expensive than a similar crop coming from another country that has the ability to [do] direct banking with Cuba. That one issue alone will help facilitate new sales of products between Virginia and Cuba.”
Haymore says some agribusinesses have told him point blank they were interested in exporting to Cuba, but “having to deal with a third-party bank in Europe or someplace else takes them out of the equation.” He says owners of Virginia companies that have been sitting on the sidelines with regard to Cuba have told him they will begin exporting if the two nations’ banks can pay each other directly.
Focus on food staples
If anyone in Virginia is an expert on trade with Cuba, it’s Haymore. He was named secretary of agriculture and forestry first by former Republican Gov. Bob McDonnell in January 2010 and then reappointed by Democratic Gov. Terry McAuliffe last year. Before being elevated to a Cabinet post five years ago, Haymore had headed the Virginia Department of Agriculture and Consumer Services under former Democratic Gov. Tim Kaine for nearly 2½ years.
During the past seven years, Haymore has made regular trips to Cuba for its annual international trade show. Every year at the November event, Havana seeks to match the products offered by private companies around the world with the annual shopping lists drawn up for bids by Cuban procurement agencies.
While attending the event, U.S. food producers and government representatives like Haymore try to meet with officials from Alimport and other Cuban agencies charged with importing between 80 and 90 percent of all the food consumed there.
In his last visit, Haymore says, Cuban officials told him once again that their nation’s continued economic difficulties will limit the total amount and variety of the country’s foreign purchases.
“They told us in November they were focusing more on the staples, the essentials for life,” Haymore reports. “From Virginia, that means soybeans. It’s a staple there. It’s an animal feed product that’s used first for animal consumption and eventually for human consumption. They’re able to afford only the necessities of life. An apple … would not be considered a staple.”
Shipments began in 2003
U.S. and Virginia agribusinesses began shipping products through the commonwealth’s seaports to Cuba in 2003, according to Haymore. Exports surged steadily from $838,000 worth of apples, pork and poultry meat that first year to almost $26 million of soybeans, processed soy products and poultry in 2006. In 2009, just before the onset of a global recession, $57 million of pork, poultry, apples, soybeans and processed soy products were sent to Cuba.
After plunging to about $32 million in 2010, the total of farm products shipped through Hampton Roads to Cuba rebounded impressively to almost $64 million in 2011 and rose again to $65.6 million in 2012.
Unfortunately in 2013, Havana’s tightening focus on essential food staples meant that only $38.4 million of soybeans and processed soy meal were shipped from Virginia, according to Haymore. Export data for 2014 had not been released by the time this article went to press.
Almost all of Virginia’s soy exports come from Perdue Agribusiness based in Salisbury, Md. It’s the grain division of the privately held poultry giant, Perdue Farms Inc. The company buys soybeans from farmers all over the mid-Atlantic region, not just Virginia, according to Julie DeYoung, a company spokeswoman.
In an email, DeYoung said Perdue Agribusiness sends one vessel a month of loose soybeans to Cuba, “plus an occasional vessel of high protein soybean meal.” She declined to disclose how large those shipments are in tons or how much they are worth in dollars.
DeYoung said the Perdue Foods division hasn’t sold poultry products to Cuba since 2006, because the nation “is a very price-driven market which isn’t a good match with our premium market position.”
In the near term, said DeYoung, “We expect it will continue to be a price-driven market so don’t anticipate it being a focus for us in the near future. We will of course continue to monitor and will review the opportunity if the market changes down the road.”
Haymore says he and his staff will be watching developments in the Cuban economy in the coming months as well as any moves in the U.S. Congress to either further liberalize terms of the U.S. economic embargo with Cuba or tighten them. In the meantime, he wants to protect Virginia’s current share of U.S. farm exports to Cuba.
“We first and foremost want to grow the commodities we send down there already,” says Haymore. “We will work diligently to ensure Virginia first holds its own and then grows the amount of what we sell, especially soybeans. Then we want to get back to apple exports … Perhaps the same situation with poultry and pork … You want to be sure you keep what you’ve got and you grow what you’ve got and find ways to get new products in there, and that’s what we’ll be doing.”