Troubled sugar market seen facing threat of a revitalised rival: Cuba

Monday, 14 September 2015 00:00 - - {{hitsCtrl.values.hits}}

Miami (Reuters): As if bearish market conditions weren’t bad enough, sugar producers in top growers Brazil, Thailand and India may soon have to face heftier competition in an already crowded field from an old rival: Cuba.

Cuba’s annual sugar exports could nearly double to almost 2.5 million tonnes by 2020, said an agriculture analyst with Platts on Friday, as the country rebuilds a struggling cane industry and moves to reclaim at least a portion of its sugar legacy.

The country’s output may swell to 3 million tonnes, said Maria Nunez, an agriculture analyst with Platts at a sugar conference in Miami, marking the return to of Cuba’s presence as a significant world supplier.

Cuba was once the world’s largest exporter. Production has tumbled from a peak of over 8 million tonnes in 1990, to just about 1.9 million tonnes in the 2014/15 crop year. In recent years, the country launched an initiative to rebuild its cane industry.

Cuba’s sugar footprint has been dwarfed by new entrants, most notably top producer and exporter Brazil where production is over 30 million tonnes.

The country may face tough conditions. The world’s sugar farmers and millers are struggling with prices near seven-year lows as consumers wade through excess supplies built up during five straight years of surplus.

Nearby United States, Canada, and Haiti would be the most likely destinations for output that could swell to 3 million tonnes by 2020, based on the current pace of growth, said Maria Nunez of Platts at a sugar conference in Miami.

That would be just a sliver of Cuba’s peak production of over 8 million tonnes in 1990, but would be up from 2014/15’s 11-year high of 1.9 million tonnes as the country rebuilds its cane sector.

Renewed trade ties would make the U.S. market a likely export outlet, Nunez said.

The United States and Cuba restored diplomatic ties in July after a 54-year hiatus.

Still, Nunez cautioned that regaining an import quota could prove tricky and slow, making Haiti and Venezuela more likely to be key growth markets in the short-term.

Cuba shipped 1.3 million tonnes of exports to destinations including China, Russia, Lebanon, the European Union, and Haiti in 2014/15, Nunez said.

“They need to boost exports in the Americas,” she said.