Cuban sugar industry restructures as another bad harvest approaches

Cuba transformed 56 sugar mills into separate companies and incorporated local plantations into them in a last-ditch effort to prevent the industry from collapsing, facing a historically low harvest in its second consecutive season.

By combining each mill with local plantation areas and preparing the subsidiaries of the state sugar monopoly Azcuba, the new entities should be able to take advantage of recent reforms and allow them to set wages and cane prices, while maintaining control of 80% of their export earnings.

The Caribbean country produced just over 800,000 metric tons of sugar unrefined last season, the lowest since 1908 and only 10% of an industry high of 8 million tonnes in 1989.

Experts consulted by Reuters maintain that the island will have problems reaching even that tonnage in 2022.

“The industry has more or less collapsed. The situation is worse this year than last and it will take time to reverse it, ”said a local sugar expert, requesting anonymity.

Provincial media have reported cane shortages, delayed mill repairs, lack of tires, batteries and fuel to transport cane during harvest.

Cuba’s economy has long depended on sugar exports, but production has plummeted since the breakup of the Soviet Union in 1991.

A statement from the Council of Ministers of Cuba, at its June meeting, stated that it was carrying out a review of the industry “to guarantee in the future the vitality of these activities, which have meant so much economically and in the history of Cuba”.

The nation has suffered from the spread of the pandemic and heavy sanctions from the United States, which has seen foreign exchange gains slash over the past two years by around 40%, while its economy contracted 13%.

Both issues have dealt substantial blows to the undercapitalized industry.

“Of the area that should be covered by cultivation in the province, 45% is reported empty,” said the newspaper Escambray, from the central Cuban province of Sancti Spíritus.

The sugar harvest in Cuba begins in November and runs through May, but this year the first mill will open on December 5, with most of it beginning grinding in late December through January. In 2020 38 mills were opened and this year there will be fewer, according to provincial reports.

Cuba consumes between 600,000 and 700,000 tons of sugar a year and has an agreement to sell China 400,000 tons annually. It was unclear how much sugar Cuba exported this year and imported to meet local demand.

Over time the situation in the industry may improve, said the sugar expert. “But they will have to go further with reforms, attract foreign investment or divert money from other sectors such as tourism,” he added.