Foreign Relations of the United States, 1961–1963, American Republics; Cuba 1961–1962; Cuban Missile Crisis and Aftermath, Volumes X/XI/XII, Microfiche Supplement

663. Research memorandum from Hughes to Rusk, April 19¹

RES–15

April 19, 1963

SUBJECT

• Effects of Loss of Cuban Sugar on Free World Sugar Market

Declining sugar stocks and rising prices are of growing concern to consumers and importing nations throughout the Free World. This paper analyzes the magnitude of the problem and its relationship to reduced shipments of Cuban sugar to Free World markets and the loss of Cuban reserves.

ABSTRACT

The drastic reduction in shipments of Cuban sugar to Free World markets in recent years together with rising consumption are rapidly exhausting previously large Free World stocks. Sugar prices, already more than 7 cents per pound in April of this year compared with 3 cents last summer, are likely to increase even further unless supplies are increased during the next crop year.

Rapidly rising sugar prices reflect the fact that two-thirds of all exports are sold under special agreements, leaving the remaining 6 million tons of free sugar to respond, price-wise, to market factors or supply and demand. The loss of Cuban stocks which, prior to 1960, were available in the event of shortages, has increased the tendency to price instability in the Free World.

Cuban exports—still roughly one-third of the world total—have increased by about 3.4 million metric tons to the Sino-Soviet Bloc but have declined by about 3.1 million to Free World markets between 1959 and the last two years (1961–62). Larger shipments from the Soviet Bloc to the Free World have made up only about 700,000 tons of this loss. During the same period annual Free World consumption has increased by about 3.5 million metric tons, but output has expanded only moderately.

Further upward movements in sugar prices during the 1963–64 crop year may be avoided if Free World supplies are increased by at least 4 million metric tons, or about 10 percent above this year’s availabilities, from either greater production or larger purchases from Communist countries. Although the USSR and, to an even greater extent, Communist China, could utilize more Cuban sugar, the present Soviet policy appears to involve avoidance of dependence on foreign sugar, while China lacks the foreign exchange for increased imports. Indeed the USSR may even sell some of its surplus sugar stocks of a million or more tons to the Free World through European Bloc countries which have had experience in the world sugar market. Moreover, the Soviets seem eager to have greater quantities of Cuban sugar marketed in the Free World. However, Cuba’s export availabilities are declining as a result of decreasing production due to the agricultural diversification program, mismanagement, and the disruption of the labor force. Although recent unverified reports from sugar brokers and Cuban refugees predict a 1963 output of 3.5 million metric tons, or even less, information available as of early April 1963 indicates that, barring unfavorable weather or other adverse developments, Cuba’s sugar production this year should be approximately 4 million metric tons, as compared with 4.8 million last year.

Although the Free World has the capability of fully replacing Cuban supplies over a period of time, high sugar prices may be expected to prevail in the interim. A concomitant benefit of this situation will be an increase in foreign exchange receipts by Free World sugar exporting countries.

[Here follows the remainder of the paper.]

1. Effects of loss of Cuban sugar on free world sugar market. Limited Official Use. 2 pp. DOS, ARA/CCA Files: Lot 66 D 50, Cuba—Standing Group.