In Cuba, sugar has been the heart of the island for centuries. The industry’s collapse since the fall of the Soviet Union has been nothing but an embarrassment for the regime and for the people themselves. So in an attempt to pull the industry up by the bootstraps, reform is well underway with plans to once again be major players in the global market.
But, it won’t be this year.
With just six weeks left before summer rains will make harvest and milling all but impossible, the harvest is officially 13 days delayed. Reuters expects sugar production to miss the 1.45 million tonne target by 150,000 tonnes, bringing the grand total to just 1.3 million tonnes. That’s not far above the measly 1.2 million tonnes last year and the 1.1 million tonnes produced in 2010, the smallest harvest in 105 years.
Not surprisingly, the key remains with the poor state of the mills. All but eight of the island’s 45 mills crushing this season were built before the 1959 revolution. Machinery is in dire straights with breakdowns reported in nearly every mill. Only Sancti Spíritus seems to be producing at a reasonable rate but mills across the island like Holguín are only running at 52% of their daily production targets while kingpin Santiago de Cuba is only going at 60%.
Cane burning is down 7.5% to date while cane deliveries are down 4.6%. Yet cane availability hardly translates to why overall production is so far down. It can only be the fault of the machines.
When the government shut down the Ministry of Sugar last year as part of its reform process, it instead replaced industrial oversight with the Grupo Empresarial de la Agroindustria Azucarera (AZCUBA). The expectation was that running the industry more like a business would be the key to getting the industry back on track.
That may be well and true, but it’s going to take vast investments in old mills, perhaps razing them to the ground and putting up new modern mills instead, in order to get the industry really humming again. Farmers are pushing for better cane varieties that have higher sugar content and can better tolerate changes in climate, which will also be key to boosting productivity.
In a twist of irony, experts from the former ministry have been working in Bolivia for the past two years to help develop and build the new mill in San Buenaventura, La Paz. The mill is being touted as super environmentally friendly, exceptionally efficient and with a whopping crushing capacity of 7,000 TCD. So if the Cubans can do it in Bolivia, can it only be lack of investment that’s keeping them from doing it at home?
Even though production has slipped behind schedule, with the better than even chance that the crush will extend into May and may even be halted all together when the rains start, leaving cane in the fields, exports seem to be doing well. Exports from Cienfuegos reached 156,000 tonnes during the first three months of the crush, with the goal of more than 258,000 tonnes exported by the end of April seen as probable.
Through 2004, the port had traditionally exported around 480,000 tonnes per season but that figure more than halved as the country’s sugar production collapsed. China remains the main importer of Cuban sugar with a supply contract of 400,000 tonnes per season. With about 700,000 tonnes needed for domestic consumption, there isn’t much room for extra exports after the Chinese order has been filled.
At least not until the country gets its industry in order.
Transitioning from the all-powerful Ministry of Sugar to this new entity was never a guarantee for a quick industrial turnaround in one night—or in a single season, rather—but it is going to have to find ways to introduce new investment into the mills quickly if they are going to make a dent in the problem, or prove themselves better managers of the industry than the ministry was.
There was rumour this week that a delegation of French investors were on the island looking at new opportunities for investment, including in sugar. If AZCUBA can’t make its first crush a stellar one, then it should at least have some serious implementable plans and investment opportunities on hand for when potential partners like the French come calling, or it risks the island continuing to fall into obscurity during a time when the international sugar market should be bringing the country nothing but profits.