A once mighty commodity producer, long vilified by the West strikes fear into other producers as its relationship with the US start to thaw. No, this isn’t Iran and the oil market, but Cuba and the Sugar market.
Cuba was once the world’s biggest sugar exporter with raw output reaching 8.1 million tonnes in 1989. Then its industry went into decline after Cuba’s main ally for 30 years, the former Soviet Union, collapsed in 1991. Cuba shut down and dismantled 71 of 156 mills in 2003 and converted 60 percent of sugar plantation land to other uses. Since then more mills have closed.
Now, it is just a shadow of its former self, exporting just 0.85 Mt during 2013/14. In first place is Brazil, which exports over 26 Mt followed by Thailand on 7.5 Mt and then Australia, exporting almost 3.3 Mt.
As Cuba opens up to outside financial investment, rebuilding its cane industry and having restored diplomatic ties with the US in July some fear that a revitalised Cuba will threaten existing sugar producers. According to Platts, exports of sugar from Cuba could more than double by 2020 to 2.5 Mt.
In reality with sugar prices at 7-year lows following five years of excess supplies there is little incentive for foreign investors to inject the level of capital required to regenerate Cuba’s sugar industry for it to compete.
Cuba’s sugar footprint was dwarfed by Brazil long ago and although Cuba is coming in from the cold its sugar industry is likely to face a bitter future.