THE EFFECT OF WAR ON THE SUGAR INDUSTRYTHE WORLD MARKET

The war has aggravated the problems which arise from thedominant position that sugar holds in the economic life of most caneproducing countries. A shrinkage of exports or a decline in theprice of sugar spells economic disaster in countries where thestandard of living and social amenities are already at their lowest.

Between 70 per cent. and 90 per cent. of total exports of Virgin

348 BULLETIN AND DIARY

BULLETIN AND DIARY 349

Islands, Antigua, St. Kitts-Nevis, and of the Vichy possessions,Reunion and Martinique, consists of sugar.

During 1936-38 Central American States and those West IndianIslands which, up till now, have remained neutral, were dependenton exports of over 8o per cent, of their sugar production, comparedwith a world average of about 28 per cent. The world's mostimportant sugar exporters were: (000 metric tons, average 1936-38)

TABLE I

Cuba 2,700; Philippines 900, Dutch East Indies 700, Australia 400,Dominican Republic 350, while U.S.A. were leading in importswith 2,800, followed by U.K. and Ireland with 2,400, British andAllied Empires and Protectorates i , ioo, Europe under Axis domin-ation 700, and Canada 450.1 The U.S.A. and the Allied powers,excluding territory occupied by the Axis and unoccupied France,absorbed in peace time about 8o per cent. of total sugar exports.Table 2 shews the position of imports, exports and productionbefore the outbreak of war.

TABLE IIIMPORTS, PRODUCTION AND EXPORTS OF SUGAR BY REGIONS, AS

PERCENTAGES 0F WORLD TOTAL, AVERAGE 1936-38

RegionIm-

ports0//0

Prod,0//0

Er- Im-ports Region ports

0/ 0//0 /0Prod.

0//0

Er-ports0'

Axisdominated

Neutral West In-dies and Central

Europe*...... 8'8t 21'4 4'4f Amerita ... o 12'9 387Neutral Europe 1'g 2'O i'of South America' 25 7'S 39U.K. and Ireland 3o'O i'6 4'S Brit and AlliedU.S.S.R. o 78 5'31 Emp. and Protect. I3'4 29'6 32'OU.S.A. and De- Vichy Colonies... 4'O 2'4 's 8pendencies 'o io'6 II'5j Total in 000

metric tons ... 8,000 29,000 8,000

SUGAR EXPORTS AS PERCENTAGE OF TOTAL EXPORTS, AVERAGE 1931-1937Mauritius 97.5 St. Domingo 636Barbados 961 Puerto Rico 62'8Fiji 73'a Hawaii 59.5Cuba 70.4 Philippines 49'8Br. Guiana 64'5 Trinidad 21.9

* Including Vichy France. t Trade with U.K. and overseas only.Portuguese Africa to Portugal. § Mainly to Iran and Mongolia.Mainly Philippines to U.S.A. Mainly Peru.

Sugar producing countries mainly affected by the discontinu-ation of exports to Europe under Axis domination are the DominicanRepublic which exported 25 per cent. of her total sugar export tothat area, Dutch East Indies i6 per cent., Union of South Africa

'The figures quoted in this article represent mostly raw value of sugar in metrictons; but some figures are not corrected with the rate of conversion raw: refinedwhich is in the neighbourhood of 100:94. The share of refined sugar in the totalsugar trade amounts to about 17 per cent.

350 BULLETIN AND DIARYI 3 per cent., Cuba 7 per cent., Haiti 6 per cent., and Peru 3 per cent.

Of greater importance, however, are the imports of U.K. andIreland, which absorbed 8o- ioo per cent. of the sugar exports ofMauritius, Union of South Africa and Australia and 60-70 per cent.of the sugar exports of Haiti, Trinidad, Kenya-Uganda and theDominican Republic.

The latest data available with regard to exports, stocks and quotasare those of February 1941, which compared with February 1939,indicate the effect of war upon the sugar exporting countries.

TABLE HIWAR-TIME CHANGES IN STOCKS AND EXPORTS

* Stocks, according to the International Agreement, shall not exceed 25 per cent.of a country's annual production and shall flot be less than io per cent, of theirexport quota.

t Including Netherlands.¡ Other than U.S.A., see also p. 351

World stocks are estimated to have reached i 2.4 million tons onSeptember Ist, 1941, achieving an all time high record (1/9/1940:

.4 million tons).Australia especially may be affected by the accumulation ofsurplus

stocks. In peace time she sent 90 per cent. of her sugar exports toU.K. But the distance of about 15,000 miles makes Australia atpresent the least suitable country from which to ship sugar to U.K.

India's sugar production has also fallen in 1940-41 from imillion to i o million tons, but this decline was exclusively due toconditions in the home market, since India is no exporter of sugar.

In the Union of South Africa production declined betweenSeptember-February 1939-40 and the same period 1940-41 from300,000 tons to 285,000 tons and exports from 148,000 tons to114,000 tons.

The latest comparable figures available for the British ColonialEmpire refer to the year September-August 1939-40. Comparedwith the same period 1938-39 production declined from i ,170,000tons to 940,000 tons, and exports from i ,o8o,000 tons to 720,000tons.

The position of the Dutch East Indies seems somewhat precarious

* Stocks End of Feb. Change An-

nualQuota

Exports Sept .-Feb. Change

1938-41%

in 000metric toits

1939 19401941 1939-41%

193839

193940

19404!

Dutch East 356 317 736 +io6o I,oiot 465 627 349 250IndiesCuba 564 1,330 1,515 - 32 8ii 447 390 46 gooPeru 32 - '00 +2130 305 139 140 113 237Dominican 73 96 126 + 725 364 89 46 59 336RepublicBrazil 214 260 324 + 490 53 39 20 3 92OHaiti 5 10 7 + 400 31 13 4 2 85OTotal ... ... 3,182

BULLETIN AND DIARY 35'

too, with a decline in exports from 1,348,000 tons in 1939 to 794,000tons in 1940.

Cuba, the West Indies' greatest sugar producer, a country whicha decade ago produced over 5 million tons of sugar, had her pro-duction almost halved in 1940. Still, at the end of the year her totalstocks amounted to i million tons, compared with 600,000 tonsat the end of 1939. The position was eased by an unexpectedincrease of American consumption in the first quarter of 1941, butthis increase cannot be expected to last. Althugh Cuba hasreceived U.S.A. credits to finance the storing of sugar, the positionof this industry will, on the whole, remain critical. Strong influencesare at work in U.S.A. to lower Cuba's share in U.S. sugar supplyquota and to omit Cuba in the re-allocation of the Philippine quota.The Philippines account for some i 4-15 per cent. and Cuba forabout 19 per cent. of the U.S.A. Import Quota.

A further cut in Cuban sugar production would lead to seriousfinancial difficulties, since the sugar mills work, on the average, atonly 25 per cent. of their capacity. The mills lie idle for nine monthsof the year (although their engineering shops are said to be suitablefor the production of defence equipment) and wage earners areemployed six months of the year at the utmost.

EUROPE

How far can sugar exporters count on the European market?While in 1914-18 European sugar beet production fell by about70 per cent., the European beet area in 1940 was 5 millionacres, 25 per cent. above the 1934-38 average.

As in the Great War, France's beet production was largelywrecked by the German invasion. Since France in peace timeimported about 450,000 tons of sugar, half of it from her colonies,her total sugar deficit in 1940-41 may be estimated at about imillion tons. The shortage was partly met by a strict system ofsugar rationing. The position will improve after the 1941-42harvest, since the area under cultivation has been doubled (but isstill 20 per cent. under the peace time level).

The introduction of rationing in almost all European countriesis estimated to have reduced sugar consumption by i 6 million tons.German consumption, amounting in ¡938-39 to 24 million tons,and almost covered by a home production of 21 million tons, doesnot seem to have excessively contracted during war time. TakingEurope under Axis domination as a whole, the beet crops asestimated for 1940-41 decreased, compared with the average1936-39 in France (by 75 per cent.), Czechoslovakia(21 percent.),Spain (i per cent.), and Poland (4 per cent.), and increased by30-40 per cent. in Hungary, Italy and Yugoslavia, 20-30 per cent.in Holland, Io-2o per cent, in" Old "Germany, Belgium, Denmarkand Roumania. The production of countries with increased crops

352 BULLETIN AND DIARYrose by I 5 per cent. (from 368 to 424 million tons) and fell incountries with decreasing crops by 34 per cent. (from 258 to ¡ 7Imillion tons), so that total production will fall by nearly 5 per cent.(from 6.25 tO 5.94 million tons).

The above figures exclude the U.S.S.R. which has become theworld's largest single sugar producer and accounts for 30 per cent.of the European total. It averaged 2.3 million tons in ¡936-39 andwas estimated at 27 million tons in 1940-4!. The main sugar beetregions lie in the Western Ukraine, and in the districts east of Kievand south-east of Gomel.

The European sugar deficit, based on peace time consumption,would amount to 340,000 metric tons. Allowing for war time changesin foreign trade, the import deficit would increase to 65o,000 tons, aquantity covered partly by the rationing of consumption, partlyby existing stocks, which in the countries overrun by Germanyamounted to about 700,000 tQns. The Reich's raw stocks declinedfrom 62o,000 tons on September ist, 1939, to 27,000 tons on Sep-tember I st, 1940.

TABLE IVBALANCE 0F EUROPEAN SUGAR TR.nE, AVERAGE 1936-39

in 000 Imports to E.rportsfrotnmetric tons Axis dominated EuropeFrom other Axis dominated To other Axis dominated

Europe ... ... ... 190 Europe ... ... 1goVichy possessions 140 Neutral Europe ... I 15U.S.S.R. ... 15 Vichy Africa ... ... igU.K. and overseas ... 655 U.K. and overseas ... i6o

Total 1,000 66o

SUGAR SUPPLIES AND CONSUMPTION IN THE U.K.

Immediately after the outbreak of war the British Governmentassumed control of British sugar supplies. Total yearly Britishconsumption in the years 1936-38 amounted to 2,350,000 metrictons ; 500,000 tons were covered by home production and i .96million tons by net imports, with stocks near 250,000 tons.

U.K. war requirements are said to be three times as high as iscovered by home production, i.e., between i and 1.5 million tons,compared with about 24 million tons in pre-war times. The sugarration was reduced in May 1941, since the aim of the Governmentto extend the beet crop by 17 per cent. in the 1940-41 seasonfailed. Personal domestic consumption on the basis of the rationsin 1941 will amount to about 400,000 metric tons. The supply ofsugar to manufacturers and brewers has also been severelyrestricted leaving in some cases only 25 per cent, of pre.war con-sumption (mineral-waters, candied peel, etc.). Some i million tonswill remain for manufacturing purposes, restaurants, exports, lossesby sinkings of ships and bombing of warehouses. About ¡50,000

impo rts from in 000 metric toRIBritish West Indies

and British Guiana 250Other Empire* 1,050- 1,300Cuba 600Dominican Republic 240Peru.........100Others 6o

Erports toEmpire 85Axis dominated territory looUruguay ... 45Other... 110

3402,300Home production 500* From Australia and Fiji 320,000 to 380,000 tons yearly.After the invasion of Holland, the sugar exports of Dutch East

Indies,' which joined the Sterling bloc, stood also at Great Britain'sdisposal. But the U.K. may have to give preference to sugar paidwith foreign exchange but offering a shorter shipping route. TheWest Indies are 3,600-4,000 miles distant from Liverpool, com-pared with 9,500 miles between London and Singapore (and 6,000miles SouthamptonCapetown). Consequently U.K., in spring1941, ordered sugar in San Domingo and Cuba, i.e. non-Sterlingcountries, although her total war-time imports are 300,000 tonsbelow the pre-war imports from Empire countries and althoughthe Government had bought the total exportable sugar crops ofMauritius, Australia, South Africa, Fiji and British West IndianColonies, a quantity amounting to about z million tons. Butof this production is grown in Sterling countries with a distance toU.K. 2,000 miles in excess of that from the West Indies. Canadawill absorb about 430,000 tons and other Empire countries 290,000tons.

STABILIZATION 0F THE SUGAR MARKET?The position of sugar producers after the war will be still more

precarious than it was at the beginning. The problem of a changefrom cane crops to other crops can only be solved as part of ageneral scheme for agriculture, industry and foreign trade of eachcountry concerned. The main difficulties working against changeare presented by the high yield of cane per acre and labour unit

In peace time 250,000 tons were sent to Europe.

BULLETIN AND DIARY 353

tons might be needed for exports. An unknown quantity has beenshipped to U.S.S.R.

Allowing for the home production of 500,000 tons, imports of amagnitude near ¡ million tons will be necessary. This quantity canbe completely covered by Sterling countries, and indeed, in thefirst ¡8 months of the war, sugar was bought almost exclusivelyfrom these areas.

TABLE VCOUNTRIES OF ORIGIN AND DESTINATION IN BRmsH SUGAR TRADE 1936-38

354 BULLETIN AND DIARYand by the possibility or even probability that the alternative cropswill, one time or another, produce a surplus too. In addition, theprice of cane land is usually considerably above the price of otheragricultural land, so that the change to other crops would involvea loss in the value of the land. A partial solution may lie in thedirection of concentrating sugar cane on the most suitable soil, andusing the rest of the land for mixed growing of food and exportcrops.

In many cases the lowering of costs necessary for the survival ofthe native sugar industry will have to be carried out by furthermechanization of cane cultivation. Attempts at a co-operativetenant system as successfully applied in the Fiji islands could bemade. In this system, heavier work is mechanized and performedby wage labour, lighter operations are carried out by family labour.For this purpose plantations are subdivided into family holdingswhich, for heavier work, are combined in larger units.

There are, further, the new possibilities of the production ofpower alcohol from sugar which has lately made considerableprogress, and which, in many countries, can compete in price withimported petrol. The U.S.A., the Philippines, South Africa andAustralia are leading in this development, which has been fosteredby the gainful use of waste molasses. Data about production ofpower alcohol in Germany and Italy' are not available but incalculating Axis fuel resources, account should be taken of thisdevelopment.

Summing up, it may be said that the sugar industry will probablybe less dislocated than after the last war. The cane producing coun-tries are notas in the last warextending but cQntzacting theirproduction. An International Agreement regulating productionand exports in almost all important sugar growing countries hasremained in force and will most probably be renewed in 1942.Surplus stocks have been financed by bulk-purchases and credits ofimporting countries. New possibilities for the industrial use of sugarhave been opened, experiments on new forms of collective mechaniz--ation have proved successful. On the other hand, as long as possibili-ties of armed conflicts exist, the drive for self-sufficiency and thepolicy of subsidies in the beet producing countries will be main-tained. General conditions in most cane producing countries. areon so low a level that for social, economic and political reasonstheir improvement is a matter of urgency. The interests of highcost and low cct countries, of cane and beet producers,2 of produc-ing and consuming countries, will continue to clash and largesurplus stocks will imperil the price level if free-market conditionsare re-established. International co-operation will be endangered

1 Italy's motor fuel consists of 4/5 petrol and 1/5 power alcohol made from sugar.2 The share of beet sugar in total sugar production was 50 per cent, before, 2!

per cent, after the last war and 38 per cent, in 1937-38.

BULLETIN AND DIARY 355

by those not adhering to or deserting from agreements concluded.But if the International Sugar Council should, in the face of thesedifficulties, succeed in stabilising the sugar market, they will haveset an example for the post war world, S. Moos.