Mr. McCone asks that the
President see these memos which were prepared in response to questions
put to him.
Attachment
OCI No. 3622/62
December 16, 1962
[Facsimile Page 2]
SUBJECT
- Rising World Sugar Prices and the Effect on Cuba
1. The rise in the world sugar price from last January’s 2.3¢ per
pound to today’s 4.3¢ reflects a weak supply outlook for 1963
combined with an anticipated normal consumption increase. Dealers on
the international sugar market anticipate reduction in Cuba’s
production even below the 1962 figure which was probably about 4.8
million tons, against an average of six million. In addition,
production will also be below 1962 levels in Western Europe, Mexico,
and the United States. The US Department of Agriculture’s call this
week for import of an additional 90,000 tons of sugar over the
existing quotas will contribute to the rising trend in the world
price. In short, the outlook is for a tight supply condition
throughout 1963.
2. Unless its sugar production drops off drastically, Cuba should
benefit from the rise in the world price, but much will depend on
Soviet policy and on Cuba’s ability to find markets outside the
Bloc. The Soviet Union and Communist China agreed in 1961 to pay a
price of 4.0¢ for Cuban sugar, a level between the low world price
and the high US premium price which ranged from 4.5¢ to 4.8¢. With
the world price now above the special Soviet price to Cuba, Cuba is
probably demanding an “adjustment.” A clandestine source in contact
with Soviet embassy officials in Havana early this month has
reported, in fact, that one of the purposes of Carlos Rafael
Rodriquez’ current mission in Moscow is to obtain a higher price for
Cuban sugar, or some other compensation for the higher world
price.
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3. If Cuba does not receive what it regards as a satisfactory
“adjustment” from the Soviet Union,
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it will almost certainly seek
to sell to free world customers on a greater scale than last year.
Such a move, if it were successful, would tend to weaken sugar
prices but probably not enough to prevent some benefit to Cuba.
4. If Cuba’s 1963 sugar crop is about the same as this year’s, there
will be about 4.4 million tons available for export beginning early
in the year. This year approximately 85 percent of Cuban sugar
exports went to the bloc. If the same division prevails next year,
the 15 percent sold in the free world would bring Cuba approximately
$63 million in foreign exchange at present prices. If Cuba were to
sell half of the 4.4 million tons to the free world in 1963 at
present prices, foreign exchange earnings would rise to about $208
million, a gain of about $145 million. Cuba receives some
convertible currency from its sugar sales to the bloc. Twenty
percent of the value of an unknown portion of Cuban sugar sold to
the bloc is paid for in pounds sterling; the remainder is paid for
in barter. This year Cuba received at least $18 million and possibly
as much as $50 million from this source.
5. Cuba already has commitments to sell sugar to Morocco, Chile, the
UAR, and certain other free
world countries, and is attempting to obtain commitments for more
sugar purchases in the Middle East. Japan, a traditional Cuban
market taking up to a half million tons of sugar yearly, has
cancelled its intended purchases for 1963. This probably would leave
Western European markets as the principal targets for Cuban sugar
salesmen.