THE WORLD SUGAR SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00429A000600010008-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: December 16, 2016
• Document Release Date: January 13, 2005
• Sequence Number: 8
• Publication Date: May 24, 1963
• Content Type: MF

Approved For Release
2 '~ v"; G'( 1963
MEMORANDUM FOR: Deputy Director (Intelligence)
SUBJECT : The World Sugar Situation
1. Attached is a background paper on the world sugar
situation, giving somewhat more detail than the brief, current
intelligence memoranda.prepared to date.
2. We plan to publish this paper as a Current Support
Memorandum.
25X1
Assistant D:i ctor
Research and Reports
OTTO E. GI
Approved For Release 2005/01/31 : CIA-RDP79T00429A0006000100
25X1
25X1
 Approved For Fjelease 2005/01/31 : CIA-RDP~9T00429A000600010008-5
THE WORLD SUGAR SITUATION
RECENT DEVELOPMENTS AND THE CURRENT SITUATION
The current world sugar price of more than 12 cents per pound
is more than 4 times the level of a year ago and the highest in
more than 40 years. The price increase, most of which has taken
place within the last 6 months (see Table 1) is attributable pri-
marily to a tight supply situation.
World sugar consumption, which has been increasing about 4
percent (2 to 3 million tons*) annually, is expected to exceed total
production by about 3 million tons in 1962/63,- the first year
since 1956/57 in which consumption has exceeded production. World
sugar production of about 51 million tons in both 1961/62 and
1962/63 was about 4 million tons below the peak level achieved in
1960/61. Carry-over stocks of sugar in 47 countries, which
normally account for about 75 percent of total world sugar production
(including Cuba, but excluding other Bloc countries,), at the
beginning of the 1962/63 season were about 19 percent -- almost 2
million tons -- below those of a year earlier. Cuban stocks had
been practically liquidated and Free World stocks were declining;
however, inventories in the USSR were unusually high..
A number of factors had an adverse effect on world sugar
production during the 1961/62 and 1962/63 seasons. Many countries
particularly in Latin America, had lowered their sugar production
targets following the 1960/61 season because of burdensome stocks.
Also, unfavorable weather in Europe for two consecutive years
reduced yields of sugar beets. Finally, sugar production in Cuba in
1963 is expected to be about 4 million tons -- substantially less
than the relatively poor crop of 4.8 million tons in 1961/62.
* All sugar tonnage figures in this paper refer to centrifugal
sugar only. Centrifugal sugar includes cane and beet sugar produced
by the centrifugal process and is the principal kind of sugar moving
in international trade. Centrifugal sugar includes about 90 percent
of total world sugar production. All tonnage figures in this paper
are in terms of metric tons.
** The years shown refer to the crop harvesting years, May through
April, with the season's production credited to the year in which
the harvest began.
25X1
Approved For Rel
 Approved For Releaase 2005/01/31 : CIA-RDP7gT00429A000600010008-5
DEVELOPMENTS. FROM WORLD WAR II TO 1960/61
Sugar production and consumption rose rapidly after World War
II. The sugar industries of all continents, aided by protectionist
policies and technological improvements both in agriculture and in
processing, rapidly expanded production. Between 1947-49 and
1960-61, total world production of sugar nearly doubled. The
greatest increases took place in Asia (excluding Communist China)
and in South America. Very substantial increases also took place
in the countries of North and Central America other than the United
States and Cuba. Production more than doubled in countries which
were net importers at the beginning of the decade, doubled in self-
sufficient countries, and increased by about 40 percent in net
exporting countries.
As a result of the tendency towards self-sufficiency in import-
ing countries, the proportion of exports in relation to world
production went down from a peak of about 40 percent in 1953 to
about 30 percent in 1961. Although consumption increased by more
than 50 percent, international trade in sugar remained comparatively
stable until 1960-61, when the USSR and Communist China became the
major outlets for Cuban supplies. This relative stagnation of the
sugar trade meant that potential exportable supplies tended to exceed
the demand for imports, but, due to regulation of the sugar market
by a system of export quotas, it was nevertheless possible to main-
tain a precarious equilibrium.
During the last decade the trends in per capita consumption
differed widely between various regions. In North America and
Oceania, consumption remained stable at a high level.; in North
Western Europe, it increased during the first part of the decade,
but showed little progress after 1956. In most other regions, per
capita consumption went up steadily, the greatest percentage increases
being generally recorded in the regions starting from a low consump-
tion level.
A major structural change in the world sugar economy began in
1960. The established postwar pattern until that year found the
Sino-Soviet Bloc* a net exporter, although only of marginal quantities.
Cuba, on the other hand, was the single most important source of
* Includes the USSR, Communist China, Bulgaria, Czechoslovakia,
East Germany, Hungary, Poland, and Rumania.
Approved For Release - 0429A000600010008-5
 Approved For Rele4
export supplies, accounting for about 30 percent of world exports.
For example, during the five year period 1955-59, out of its total
annual exports of 5.2 million tons of raw sugar,* only about 270,000
tons went to the Sino-Soviet Bloc. But in 1960, there was a sharp
change in the direction of Cuban exports to new outlets in the
Sino-Soviet Bloc. This change in the pattern of world trade in 1960
was facilitated by exceptionally favorable weather conditions and
record crops outside the Sino-Soviet Bloc. In many countries,
large increases in production took place, notwithstanding the intro-
duction that year of measures to restrict the area under crops.
In 1961, Cuba shipped close to 4.8 million tons to the Sino-Soviet
Bloc (75 percent of its total exports) and only 1.6 million tons
to other destinations. While some imported Cuban sugar was either
re-exported from the Sino-Soviet Bloc or made exports of domestic
beet sugar possible, the total exports to non-Bloc areas from the
Sino-Soviet Bloc and Cuba together were less than four million tons,
as compared with about six million in 1959.
Between January 1960 and September 1962, Cuba reported ship-
ments of about 10.7 million tons of sugar to the Bloc, representing
63 percent of its total exports. The largest Bloc importers were
the USSR (65 percent), followed by Communist China, Poland, East
Germany, and Czechoslovakia. Beginning in 1962, the Bloc had agreed
to import annually through 1965 almost 4.9 million tons of Cuban
sugar. This amount was to be distributed in millions of tons, as
follows: USSR, 3.0; Communist China, 1.2; European Satellites, 0.56;
and North Korea, 0.10. Faced with a relatively poor sugar crop in
1962, however, Cuba reduced the 1962 allotment to the Bloc -- mostly
to the USSR -- by 500,000 tons. Although actual exports to the Bloc
are estimated to have totaled only 3.7 million tons in 1962, about
500,000 tons of the -i.8 million tons imported by the Bloc in 1961
are estimated to have been on 1962 accounts. Therefore, Cuba came
close to fulfilling the revised sugar commitments with the Bloc for
1962.
IMPACT OF THE CHANGED SUGAR SITUATION ON THE US AND ON THE
COMtMJNIST BLOC
Any significant change in world sugar supplies is of considerable
importance to the United States. The United States is the world's
largest importer of sugar, taking from foreign suppliers over two-
fifths of its total sugar needs -- currently about 9 million tons,
* Raw sugar is sugar that has not been fully refined to remove the
impurities. Although edible, it generally is not consumed in the
raw state (100 parts of raw sugar will yield about 92 parts of re-
fined sugar).
25X1
Approved For Relerase 2005/01/31 : CIA-RDP79T00429A000600010008-5
 Approved For Release
raw value, per year. Domestic United States sugar growers are
protected by a system of import quotas.
The US sugar industry operates under a quota system that
limits, by areas, how much sugar can be marketed in the US each
year. These quotas were suspended during the World War II period,
but were reestablished, with some modifications, in 1948. Total
quota supplies and their distribution by areas of origin in 1948
and 1959-63 were:
Percentage of Total
19 1959 1961 -1962 196-3-17
Domestic beet area 24 24 27 26 28
Mainland cane 6 6 8 8 9
Hawaii 10 11 11 11 11
Puerto Rico 14 10 10 9 9
Virgin Islands J J ?/ J
Philippines 4 11 14 13 12
Cuba 41 35 0 0 0
Other countries 1 3 30 33 31
Total 100 100 100 100 100
Total supplies 6,439 8,388 8,801 9,072 8,890
(1,000 tons)
1. In early May the 1963 quota was raised by 544,300 tons, bringing
the total to 9.4 million tons.
2. Less than 0.5 percent.
Changes in the proportionate shares of the various areas
between 1948 and 1959 were relatively minor. The largest change
occurred in the Philippines, an increase from 4 to 11 percent.
This was a result of the recovery of the sugar industry from the
destruction suffered during World War II. Amendments to the Sugar
Act in 1951 and 1956 reduced slightly the quota for Cuban sugar.
A drastic shift occurred, however, in mid-1960 when sugar
imports from Cuba were suspended. Since that time nearly all of the
supply formerly coming from Cuba has been purchased from other
foreign countries. The Sugar Act includes a formula for allocating
such supplies among countries having "statutory" quotas in the US
market and also directions for obtaining quantities not available
under the formula from the same or other countries.
25X1
Approved For Release 2005/01/31 : CIA-RDP79T00429A000600010008-5
 Approved For Release 2 CIA-RuP 19 000600010008-5
Although the shift in the US source of supply from Cuba
to other countries has been much easier than many people expected,
various problems have arisen. Deliveries from Cuba could be made
to the US within a few days after purchase. Much of the new
supply must come far greater distances, and delivery dates are less
certain. This creates a need for larger inventories in the US, and
more ships to maintain the needed volume of imports.
During the recent price increases some foreign producers
apparently have been holding back in filling their assigned quotas
hoping for still higher prices. Early in May the Department of
Agriculture raised the total sugar quota to 9.11 million tons,
matching the record set in 1960. This enlarged the "global" quota
by 200,800 tons above the 1.36 million tons set previously. The
US "global" quota (formerly assigned to Cuba) is filled on a first-
come, first-served basis by foreign producers.
There is no indication to date that the delivery of 10.7
million tons of Cuban raw sugar to the Sino-Soviet Bloc during the
period 1960-62 has had any profound impact on the Bloc's ambitious
long-term plans for expansion of its domestic production and its
per capita consumption of refined sugar. Certainly these imports
have prompted a number of adjustments, including an increase in
Soviet stocks of sugar (a move involving storage problems and some
spoilage), the allocation of some domestically produced sugar beets
for use as livestock feed, increased sales by the European Satellites
of sugar in markets of the Free World (occasionally at a loss), and
the reallocation by Communist China of certain areas formerly
devoted to sugar beets and sugarcane to the sowing of food grains
in an attempt to alleviate serious internal food shortages. For the
most part, however, these adjustments have not been large and have
been accomplished reasonably effectively, although not without some
cost.
Although there are no firm data available on the amount of
surplus sugar currently held by the USSR, a reasonable estimate can
be made. Soviet stocks of sugar as of 1 January 1963 are estimated
to have been about 4+ million metric tons (refined value). The size
of Soviet stocks before the build-up in recent years suggests that
the Soviet Union now has about one to two million tons of sugar
which could be sold on the world market (See Table 2).
25X1
Approved For Release 2005/01/31 : CIA-RDP79T00429A000600010008-5
 25X1
25X1
Approved For Re
The Soviets may sell sugar from their surplus stocks
The evidence currently available indicates that Cuba, will sell 1.0
million - 1.2 million metric tons of sugar to the free world during
1963 compared with 1.4 million metric tons in 1962.
25X1
25X1
25X1
25X1
to the free world by Cuba in 1963 is the price at which the sugar
Of greater uncertainty than the volume of sugar to be shipped
under a variety of price arrangements. Uome saes are made on the
basis of the spot price prevailing at the date of the contract, some
on the basis of the spot price prevailing as of the month of delivery,
and some on the basis of an average price in the month of delivery
but with specified maximum and minimum price. Thus Cuba will deliver
25X1
25X1
Approved For Rele CIA-RDP79T00429A000600010008-5
 25X1
Approved For Relea
sugar to the free world during 1963 at prices ranging all the
way from the $70 per metric ton
to probably at least the 2
per metric ton prevailing curren ly in the world market.
If the mid-point of about $165 per metric ton is taken
as the basis for an estimate, the estimated free world sales
would be $165 million to $200 million, depending upon the volume
shipped.
Given the estimated range of exports to the free world, sales
to the Bloc will be 2.0 million - 2.5 million metric tons compared
to 3.7 million metric tons in 1962.
Assuming that 1963 sugar production is between 3.8 and 4.0
million metric tons and that domestic consumption continues at about
0.5 million metric tons, total export earnings from sugar would be
$365 million - $400 million. The value of sugar exports during 1962
was about 430 million.
The sugar shortage, and unusually high prices seem likely to
persist for awhile. Forecasts for the 1963/64 crop are for another
year of production less than consumption. The futures market reflects
this judgment. On May 20 the futures market closed as follows:
SUGAR (World Contract)*
July 11.95 May 10.66 b
September 11.48 b July 10.55 n
October 11.32 b September 10.22 b
March 10.83 b
b = bid
n - nominal
* No. 8 Contract, which is for bagged sugar F.O.B. and stored at
Greater Caribbean ports (including Brazil).
Approved
25X1
25X1
25X1
25X1
25X1
 Approved For Releo
The European beet crop which will be harvested this fall is
the first source which could raise supplies substantially to meet
increased demand. However, indications are that European sugar
beet plantings this spring are up only 3 percent above last year,
far below earlier expectations. A very late spring in Europe was a
major factor holding down the increase in plantings, and the late-
ness of the season also dimmed early prospects for higher yields
this year.
Sugar has had its ups and downs in the past and no doubt will
continue to do so in the future. The big question now is when will
production again equal or exceed consumption. Future production
will depend to a large extent upon government policies as well as
the response of private initiative to higher prices and other develop-
ments on the international sugar scene.
For the long run there is every reason for assuming that the
forces which have operated in the past to raise production will
continue to do so. Many areas can significantly expand sugar produc-
tion. For example, the Philippines government is encouraging and
offering assistance to both growers and processors to expand pro-
duction. (See Table 3). Beginning in 1961 sugar again became the
leading dollar earner among Philippine exports. This was due to the
increased quotas given the Philippines in the US market as a result
of the elimination of the Cuban sugar quota. Sugar is also a major
foreign exchange earner for Taiwan. The Taiwan Sugar Corporation is
currently attempting to obtain a $30 million loan from a US financial
organization to expand sugar production. A study by the Food and
Agricultural Organization of the U.N. has concluded that very sub-
stantial expansion can be anticipated in Africa, the Near East, Latin
America, and to a smaller extent in Asia and Oceania. An abundance
of excellent sugar land, coupled with relatively low-cost labor,
skilled technological and business management and adequate capital
resources, will greatly facilitate production expansion, particularly
in Latin American countries.
25X1
Approved For Release 2005/01/31 : CIA-RDP79T00429A000600010008-5
 25X1
Approved For Rele
Average 1925-29
Average 1934-38
Average 1950-53
1954
1955
1956
1957
1958
1959
1960
1961
1962
Table 1. World 1/ Raw Sugar Prices
2.20 1962 - March 2.65
April 2.69
0.96 May 2.60
June 2.63
4.54 July 2.92
August 3.24
3.26 September 3?18
October 3.28
3.24 November 3.65
December 4.29
3.47
1963 - January 5.41
5.16 February 6.o6
April 29 8.30
3.50 May 20th 11.60
2.97
3.14
2.91
2.98
25X1
25X1
Approved For Relea4e 2005/01/31 : CIA-RDP79T00449A000600010008-5
 Approved For Rel
Table 2. The Sugar* Situation in the Soviet Union
25X1
Year
Beginning
Stocks
Production
Net
Trade
Total
Supply
Co
ns
umption
Ending Stocks
1950
NA
2052
+ .26
NA
NA
1.46
1951
1.46
2.98
+ .22**
4.66
2.77
1089
1952
1.89
3.07
+ .20**
5.16
3.27
1.89
1953
1089
3.43
+ .26**
5.58
3.78
1.80
1954
1.80
2.61
+ .4o**
4.81
4.24
0.57
1955
0.57
3.42
+ .52
4.51
3.80
0.71
1956
0.71
4.35
- .05
5.01
4.26
0.75
1957
0.75
4.49
+ .10
5.34
4.29
1.05
1958
1.05
5.43
o2
6.46
4.11
2.35
1959
2.35
6.01
.01
8.35
5.49
2.86
1960
2.86
6.36
.01
9.21
6.o5
3.16
1961
3.16
8.38
- .18
11.37
7.11
4.26
1962
4.26
7.8o
.626
11.43
7.51
3.92
1963
3092
7 Includes sugar refined in Soviet refineries from imported raw sugar.
2 Does not include raw sugar imports.
3 Difference between total supply and ending stocks.
Refined.
Estimate.
25X1
Approved If
 Approved For Rele*se 2005/01/31 : CIA-RDP79TOO429A000600010008-5
Table 3o Production of Sugar on Taiwan and Philippines
Thousand Tons Raw Value
Taiwan
1958/59 968
1959/60 798
1960/61 948
1961/62 724
1962/63 760*
Philippines
1,372
1,387
l ~, 317
1,x+68
1,623
* The drop in production between 1960/61 and 1962/6,3 resulted
from both a decrease in acreage and lower yields per acre.
25X1
Approved For Releose 2005/01/31 : CIA-RDP79T00449A000600010008-5
 Approved For Release 2005/01/31 : CIA-RDP79T00429A000600010008-5
Approved For Release 2005/01/31 : CIA-RDP79T00429A000600010008-5
 Approved F ff je1aa! a QW5/0I1t3#: dsPA iP79T00429A000
DA-1 F 24 May
Cline k_,
25X1
25X1
World Sugar Market
;IMAI4K`; You asked to be brought up to date on
why sugar has become such a sticky subject.
rld
This paper suggests that, iis price:
shortage that has quadrupled last erari
levels natural forces will eventually r pr
the supply/demand equilibrium.
Among the several factors contributing to
the current anomalous situation are the
constantly expanding demand, the reduced Cuban
productions and the controls imposed by various
governments.
I found this a difficult paper to skim;
I hope you have better going with it.
I I has advised that the Director
win not need to see this paper; he has been
following the situation and ORR wwith aheir
briefing paper for him Monday, along
comments on Agriculture's paper for the NSC
Standing Group.
Approved For Release 2005/01/31 : CIA-RDP79T00429A000600