Cuba ripe for rice sales, governor says

STUTTGART -- Arkansas needs to do what it can to position itself to export goods such as rice and poultry to Cuba as Congress debates whether to end a 50-year-old trade embargo with the island nation, Gov. Asa Hutchinson said Friday.

"While I am very concerned with [Cuba's] suppression of human rights, I also recognize that agricultural products shouldn't be used as a tool of foreign policy," Hutchinson told about 500 people attending the Arkansas Rice Expo at the Grand Prairie Center.

Hutchinson said Cubans want high-quality, U.S.-grown rice which comes with reduced transportation costs given the country's proximity to U.S. ports. Demand will grow as the country's economy improves in areas such as tourism, he said.

"As they expand their markets and their tourist opportunities, which is going to happen in the coming years, there's going to be more demand for rice. Arkansas needs to be there at the table and be No. 1 in exports to Cuba and other global markets," Hutchinson said.

With the reopening of embassies and a return to normal diplomatic relations, U.S. business are assessing how to gain access to the Cuban economy, which is heavily controlled by the nation's government.

In late September, Hutchinson will lead a trade delegation to Cuba to talk about agricultural exports and other ways businesses from the state can gain inroads there.

Congress must first lift the embargo, but the House and Senate disagree on the process.

U.S. Sen. John Boozman, R-Ark., wants to repeal a law prohibiting U.S. banks and other businesses from extending credit to Cuba for agricultural exports. On July 23, an amendment to that effect was attached to the Financial Services and General Government Appropriations bill now pending before the Senate.

At the Rice Expo, U.S. Rep. Rick Crawford, R-Ark., called the amendment a good first step, but added that the U.S. government and businesses need to identify other ways to work with the Cuban government to step up agricultural exports.

Crawford said it's unlikely that Congress will lift the entire trade embargo any time soon, given opposition to the centralized nature of the Cuban economy. But U.S. interests should be looking to develop a private entity that will allow exports to Cuba once the "cash and carry" requirement is lifted.

"The impediment is not necessarily the Cuban government, it's ours," Crawford said after his talk. He said the time has come to explore ways to provide incentives to the private sector to open the market for U.S. exports, adding that there are already several nongovernmental organization working in Cuba.

"If they know that the policy has changed with respect to U.S. [agricultural] commodities, then we hope to see nongovernmental entities rise, if there's not one already, that we could work with," Crawford said. That would allow U.S. commodities and products to reach Cuban markets without having to go through the government's central purchasing agency, Alimport.

Friday's Rice Expo is an annual event that promotes the state's rice industry through events such as field tours, presentations on rice breeding, weed control, and irrigation, as well as cooking demonstrations, horticulture seminars and other activities.

Arkansas is the nation's leading rice producer, growing slightly more than half of all U.S. rice.

Speaking during a breakout session earlier in the day, Terry Harris, senior vice president for marketing for risk management for Stuttgart-based Riceland Foods, said breaking into the Cuban market will be tough.

"When people say we need to have the ability to sell directly to the people, that's not possible" because exporters are required to sell directly to the government, which then rations goods back to the citizens, Harris said. He said Alimport spends as much as $1 billion annually on food purchases.

Cuba consumes 900,000 tons of rice each year, but is only capably of raising 400,000 to 600,000 tons -- which means it must import the difference. Currently, its chief supplier is Vietnam, which allows Cuba to buy on credit, taking as long as two years to pay. Harris said Vietnamese officials have developed close relationships with their Cuban counterparts, which has resulted in low prices and easy credit.

While the U.S. ships some agricultural products to Cuba, it received its last shipment of U.S. rice in 2007 worth about $24 million, according to the U.S.-Cuba Trade and Economic Council, which tracks relations between the two countries. Frozen chicken is Cuba's top U.S. agricultural import, with the island nation buying chicken worth $147.6 million in 2014.

Because of the poor state of its economy, Cuba needs credit to buy commodities, he said, adding "Cuba is a cash-strapped country."

However, he said there is interest in U.S.-produced rice because of its quality and proximity. U.S. processors could deliver a shipment to Cuba in a few days while it can take 60-90 days for a shipment to arrive from Vietnam.

Keith Glover, president and chief executive of Producers Rice Mill said access to Cuba is one of several factors that will affect rice prices in the coming year. Others include the strong U.S. dollar in relation to other currencies, production yields in the U.S. and other rice-producing nations and worldwide weather.

He said exports to countries such as Colombia, Venezuela and Iraq could create demand and keep prices stable as worldwide rice stocks hold steady.

But he said U.S. producers do have several advantages, he said. Rice consumption in the U.S. is holding steady. About 60 percent of the rice produced in the United States is consumed here. And, 88 percent of U.S. production remains in the Western Hemisphere. However, he said he expects South American countries such as Argentina, Uruguay and Brazil to price their rice crops aggressively on world markets this year.

Business on 08/08/2015

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