Cuban Sugar: Will Obama Coat The US With Supply?

Joe Conason' editorial in this Saturday's Chicago Sun-Times laid out a theory gaining traction among U.S. liberals - that lifting the Cuban embargo can help open the floodgates for cheap sugar-based biofuels to alleviate skyrocketing energy costs.

I have zero interest in arguing about ethanol science or having a political debate over lifting trade sanctions against Cuba. What I am interested in is what any thaw in U.S./Cuban relations might mean for global sugar production and how that would impact the markets, which for the past year, have been driven by the sprint between surging Brazilian supply and demand.

It's important to remember that Cuba, today an importer of refined sugar, was the world largest exporter and third largest producer as recently as 20 years ago. Back then, total production on the island averaged as much as 7 million metric tons a year as opposed to this year's official (and probably overstated) 1.5 million. Decades with no reinvestment in infrastructure following the collapse of the Soviet Union have left the island's farms and refineries in shambles.

Since assuming power, Raul Castro has been slowly implementing small economic and social reforms leading many to conclude that he may be more open minded towards overtures from the U.S. than his older brother was. Meanwhile, Barack Obama openly indicated his willingness to consider steps towards normalizing relations with Cuba in recent years (although he has been much more tight lipped on the subject since assuming the role of candidate). Obama's real chance at victory in November, coupled with a new flexibility among Cuba's leaders make the end of nearly 50 years of trade sanctions seem like a possibility for the first time.

Regardless of whether Conason is right about the impact of sugar on global oil dependency, the re-emergence of Cuban Sugar exports to the U.S. would certainly recast the entire world market for Sugar.

Andrew Barber
Director
Research Edge's Sugar Chart

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