(DFA Leader Vol. 7 No. 9 - September 2004 )

A country frozen in time

DFA member Steve Irsik travels to Cuba to explore trade opportunities

Royal Dairy LLC, located on the wind-swept plains of Southwestern Kansas is a long, long way from the tiny island country of Cuba. But for Steve Irsik, DFA member from Garden City, Kan., the political embargo by the United States on this little communist neighbor 90 miles off the coast of Florida hits home in the form of lost market opportunity.

A recent trip to Cuba with Kansas Secretary of Agriculture Adrian Polansky and 35 fellow Kansas wheat growers was an eye opening experience for Irsik.

Billed as a seminar for the members of the Kansas Wheat Seminar group, the trip to Cuba was arranged by Barry Flinchbaugh, agriculture economist at Kansas State University Extension.

“The consensus among our group was that if the trade embargo with Cuba hasn’t worked after 42 years, then maybe we should consider an alternative strategy and change the current policy,” says Irsik. “Opening trade and tourism with Cuba would benefit U.S. farmers and would help boost the standard of living for the Cuban people.”

As part of the tour, the Kansas group met with Pedro Alveres, president of ALIMPORT, the agricultural trade arm of the Cuban government in charge of importing all the food for the communist nation.

“He kept telling us he wanted to buy wheat from us saying ‘Lets sign a deal. I need a hundred-thousand bushels of wheat’” recalls Irsik. “But he knew we weren’t there for that.”

The trade officials made it clear to the U.S. visitors that Cuba wanted to buy their food from the United States. The simple fact is that if they could buy their food from the U.S. it would save millions of dollars in freight costs, points out Irsik.

The Kansas contingent also toured farms and a cigar production plant. Generally, Cuban farming operations fall into three categories. Individuals can own their own farms and can pass the land on to the next generation. There are also democratically operated farmer-owned cooperatives. And being a communist country, there were also state owned farms. Any livestock the group saw was primitive, as the lush tropical grass lacked protein to efficiently produce beef or dairy.

“I think there’s potential for marketing dairy products in Cuba some day,” says Irsik. “Much of the milk sold there is powdered and imported from New Zealand.”

There has been some trade liberalization with Cuba in recent years. Former-president Clinton signed the Trade Sanctions Reform and Export Enhancement Act in 2000 that allowed certain exceptions from U.S. sanctions for agricultural and medical exports. However, even though the U.S. has sold $620 million worth of goods to Cuba, the U.S. cannot buy anything from Cuba. The result is that agricultural products from the U.S. cost 20 percent more than the world market price because ships would have to make the return trip empty.

“Still, the general feeling is that there is nothing going on,” says Irsik. “No economic activity. Nobody is building anything. I don’t think a building in Cuba has been painted since the revolution. They can’t afford to buy paint.”

Irsik also noticed the lack of traffic on the roads in Cuba. In the U.S., he pointed out, the highways are typically swamped with tractor-trailers, cement trucks, cattle trucks and commerce of all kinds.

“It just appears that the whole county is slowly rotting away, coming down around their ears,” says Irsik.

Managing assets

Back in the U.S., Irsik is chairman of the board of Royal Farms Dairy, a dairy established in 2000 that milks 6,000 cows in an open lot system. Kyle Averhoff manages Royal Dairy, which ships its milk through DFA. Royal Farms dairy, organized as an LLC, is owned by Irsik Family Farms, local businessman Steve Blickenstaff and three additional investment partners from California.

Irsik manages the farming and ranching operations owned by he and four brothers who are not directly involved in the operation. However, Irsk’s son Stephen helps manage the farm, which includes 50 employees. The dry land and irrigated farming operations grow wheat, alfalfa and silage for the dairy. An Angus cowherd rounds out the operation.

“My job is to manage this portfolio of assets, which includes land and water,” says Irsik. “By going into the dairy business, we have an opportunity to add value to our land and water. I was also looking for an opportunity to add value to the other things we do, which is grow corn and roughages. Operating a dairy also gave us some diversity as well as the hope of a new profit center.”