Plenty of Sugar

When President Eisenhower last week decided to give Fidel Castro his lumps, he set off a flurry of excitement on the New York Coffee and Sugar Exchange, clearinghouse for much of the world's sugar. Just before Ike announced a slash of 700,000 tons in the amount of sugar that the U.S. would buy from Cuba during the rest of 1960, world sugar prices dropped 3 to 8 points, i.e., hundredths of a cent a pound, in expectation of the cut --and in fear that Cuba would dump its surplus sugar on the world market. Instead, Cuba raised its minimum export price from $3 to $3.25 a hundred pounds in an effort to recover part of its losses on sugar sales. Thereupon, in heavy trading world sugar futures shot up again, only to level off at week's end.

Actually, Cuba could not dump its sugar and remain a member of the powerful International Sugar Council, which set Cuba's 1960 sugar export quota at 2,700,000 tons, excluding its shipments to the U.S. The world already has 13.7 million tons of surplus sugar, will add another 600,000 tons this year. The question is not whether the U.S. will suffer any sugar shortage--it will not--but rather it is who will inherit the market that Cuba loses.

Premium Prices. The U.S. has traditionally bought the biggest chunk of its sugar from Cuba, about 3,000,000 tons of raw sugar a year. This is more than half of Cuba's total exports and about one-third of U.S. needs. The rest is supplied by domestic beet-and cane-sugar producers (53%) and by 15 other nations under annual quotas. To all of them, the

U.S. pays nearly 5-c- per lb.--or more than 2-c- above the world free market price. This premium is designed to keep the U.S. sugar price from fluctuating wildly with the world market price, and to eliminate both the very high prices that hurt the consumer and the very low prices that are disastrous to producers. The Secretary of Agriculture does not set an exact price, but controls it by increasing sugar quota allotments when prices are headed upward, decreasing them when prices are headed downward.

The Agriculture Department last week estimated that the U.S. will require 200,000 tons more than last year's 9,400,000 tons. It immediately assigned 140,000 tons of that amount to quota nations (the other 60,000 tons would ordinarily be Cuba's share). Thus the U.S. 'must find 760,000 extra tons of sugar before year's end.

Big Windfalls. U.S. growers may provide an extra 200,000 tons as their share of the divvy. Quota nations other than Cuba will also get increases. They may range from 7,000 tons for such small quota countries as Costa Rica and Haiti to nearly 80,000 tons for the Philippines. Mexico. Peru and the Dominican Republic will get windfalls. The Mexicans now hope to provide up to 200,000 tons v. their present 65,000. The Dominican Republic, where Dictator Trujillo controls the sugar industry, expects a windfall of about 200,000 tons, and Panama will increase its quota from 3,600 to 10,000 tons, providing a bonanza for the family of President-elect Roberto F. Chiari, which owns the country's biggest sugar plantations and refinery. All of these countries will be paid at the premium quota rate.

Once the quota nations have had their share, the U.S. can make up any remaining sugar deficit by buying from such nonquota nations as Brazil, which is ready to sell up to 300,000 tons of surplus sugar this year, and Australia, which has more than 200,000 tons available. For sugar bought from nonquota nations, the U.S. will also pay its higher quota price.

Permanent Cut. Cuba will lose $65 million on the sugar slash this year, plus another $25 million for extra allotments that would have been due her. Congress is expected to revamp the entire Sugar Act when it returns in August, may cut Cuba out of the quota system permanently. In any case, after allotting additional quotas to friendly nations and to U.S. farmers, the U.S. will not lightly return them to Cuba. U.S. beet farmers particularly stand to benefit by the cut. Their costs have long been above foreign producers' (the quota system is partly to protect them from cheaper foreign sugar), but they have gradually cut costs by improving technology.

Cuba is unlikely to get much real help from Russia, although it recently signed a $100 million barter agreement to take Cuban sugar in return for machinery, consumer items and technicians. Russia, already the world's biggest sugar producer, is a net exporter of sugar; at best, the Cubans could expect to market one-sixth of their next year's crop to the Soviets. They may find, as Nasser did when he bartered cotton to Russia, that the Communists will dump it elsewhere, depriving them of other markets.

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