CUBA: Sugar Industry in No Position to Take Advantage of High Global Prices

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Apr 28 2005 (IPS) - This year’s sugar harvest in Cuba will yield barely 1.3 million tons, an especially gloomy forecast considering the current high prices for this commodity on the world market.

That means this Caribbean island nation will only be able to export around 900,000 tons of sugar, at a time when the world market price has risen from 6.42 cents of a dollar a pound in January 2004 to over 10 cents a pound in the first four months of this year, according to experts consulted by IPS.

Moreover, prices are expected to continue rising throughout the rest of the year, as a result of increased global demand and decreased production in a number of countries.

According to estimates from the International Sugar Organisation (ISO), quoted by the Cuban press, the growth in international demand for sugar during 2004-2005 will result in a supply shortfall of 2.8 million tons.

Cuba is missing out on a major opportunity to take advantage of these strong world market prices, which could reach as high as 11 or 12 cents a pound over the next few months, an economist and researcher who preferred to remain anonymous told IPS.

The island exported 1.8 million tons of sugar in 2004 and 1.7 million tons in 2003, but in order to satisfy domestic demand of between 600,000 and 700,000 tons, it now actually has to import white sugar from Colombia and Brazil.

If the projections are accurate, this year’s sugar output will be the lowest in a century, due to the drought conditions in much of Cuba and the lack of basic inputs like fertilisers, herbicides and other resources that could improve crop yields.

While the sugar industry has suffered the effects of three major and costly droughts in the last 50 years, the one currently plaguing the island is considered the worst in a century by industry authorities.

As a result, the harvest now underway, which will wrap up in early May, will fall far short of the goal of surpassing last year’s harvest, which was 2.5 million tons, roughly 300,000 tons more than in 2003.

Researchers have also pointed out that the shortage of fertilisers (nitrogen, phosphorous and potassium) has further exacerbated the deterioration of the soil, already seriously depleted by years of intensive sugar cane cultivation, without an adequate regime of crop rotation or diversification.

The scarcity of rain thus had an even greater impact on sugar cane plantations already made vulnerable by the deficit of soil nutrients.

The current harvest also reflects the consequences of an irregular supply of herbicides and minimal incentives for sugar cane farmers, whose income has fallen short of their expectations.

Some experts maintain that one of the main causes of the fall in production of a commodity that was once the backbone of the Cuban economy is the decreased investment in the sector over the last two decades.

Statistics included in a book by Cuban economist Armando Nova indicate that investment in the sugar industry represented 18.8 percent of all investments made by the country during the period from 1981 to 1985. Cuba produced eight million tons of sugar in 1985, and reached 8.1 million tons in 1990.

But investment in the sector dropped to 6.6 percent between 1996 and 2001, according to the figures quoted in "Reflexiones sobre economía cubana" (Reflections on the Cuban Economy), published in 2004.

In 2002, Cuba’s socialist government initiated a process of restructuring the sugar industry, which included the closing of 71 sugar mills and a reduction of the amount of agricultural land used for sugar cane cultivation. These measures were declared to be aimed at boosting the efficiency and competitiveness of the sector.

Another goal of this restructuring, which reduced sugar production capacity by 50 percent, was to free up lands used less than optimally in sugar cane cultivation for food crops and reforestation.

But economists note that this transformation process will require adequate initial financing, particularly to re-establish sugar cane production yields that correspond to the current industrial capacity for the manufacture of sugar and sugar cane derivatives.

Among the collateral effects of the drop in sugar production is the decrease in the generation of electricity from the biomass supplied by sugar cane waste products, which fell from 10 percent to 5.6 percent of total energy production between 1990 and 2002.

It is estimated that the cost of generating a kilowatt of electricity from sugar cane bagasse is 50 percent lower than using fossil fuel. In addition, biomass is a renewable and non-polluting energy source.

Those who support the development of the sugar industry stress that in addition to the high biomass yield of sugar cane plantations, they also play an important role through photosynthesis, absorbing carbon dioxide (the main "greenhouse gas") from the atmosphere and producing oxygen, and thus, like forests, they contribute to curbing global warming.

Cuba’s socialist government, however, has opted to promote other sectors like nickel and oil mining, as well as tourism. These are viewed as safer bets than sugar, which is at the mercy of both world market prices and the climate – equally unpredictable forces.

"This country will never live off of sugar again; that belongs to the era of slavery," Cuban President Fidel Castro stated in late March. He also stressed the excessive fuel consumption of this industry that was once "this country’s means of support, and is now its source of ruin."

Castro said that the sugar sector had been allocated 293,000 tons of fuel this year, and that it eats up "three times more" fuel than the Ministry of Transportation.