Update on Cuba’s Non-Sugar Agricultural SectorJuly 19, 2011

Dr. Mario A. Gonzalez Corzo, Ph.D.Lehman College, CUNY

Mario A. Gonzalez Corzo, Ph.D.

Department of Economics and Business

LEHMAN COLLEGE, CUNY

July 19, 2011

An Update on Cuba’s Non-Sugar Agricultural Sector

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“Las dificultades agrícolas deben de tener un final porque basta ya de historias de tiempos antiguos, lo sabemos porque más o menos esa es la impresión recogida en las asambleas anteriores. No se trata de decir cosas nuevas, sino de traer ya los resultados de los cambios que hacen falta: ese es el lenguaje de ahora.”

“The difficulties encountered by the agricultural sector must be finalized (or resolved); we heard enough stories about the past; we know this because more or less this is the information gathered in previous Assemblies. It is not about saying new things, but rather showing the results of the necessary changes: that is the (new) language now.”

Granma, July 11, 2011

Outline

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Performance Indicators (2005 – 2008) Policy Measures (2007 – 2010) Recent Performance (2008 – Present) Output Indicators Yields Agricultural Wages Sales in the “Mercado Agropecuario”

• New Policy Measures (2011 – Present)

Performance Indicators (2005 – 2008)

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2005 2006 2007 2008Change

2005 -2008 % ChangeViandas 2,575,300 2,202,000 2,369,500 2,150,700 -424,600 -16.5%Roots and tubers 1,801,800 1,330,200 1,378,600 1,392,500 -409,300 -22.7%Plantains 773,500 871,800 990,900 758,200 -15,300 -2.0%Greens 3,203,500 2,672,100 2,603,000 2,439,300 -764,200 -23.9%Cereals 730,100 739,600 808,400 761,700 31,600 4.3%

Rice 367,600 434,200 439,600 436,000 68,400 18.6%Corn 362,500 305,400 368,800 325,700 -36,800 -10.2%

Legumes 106,200 70,600 97,200 97,200 -9,000 -8.5%Beans 106,200 70,600 97,200 97,200 -9,000 -8.5%Tobacco 26,000 29,700 25,600 21,500 -4,500 -17.3%Citric Fruits 554,600 373,000 469,000 391,800 -162,800 -29.4%Other Fruits 819,000 746,500 783,800 738,500 -80,500 -9.8%Cocoa 2,067 2,120 1,379 1,100 -967 -46.8%

TABLE 1. CUBA: NON-SUGAR AGRICULTURAL OUTPUT (in Tons)

TABLE 2. Cuba: Non-Sugar Agricuture, Yields, Selected Crops (tons per hectare

2005 2006 2007 2008Change

2005 - 2008 % ChangeViandas 7.42 7.78 7.73 7.69 0.27 3.6%Roots and tubers 7.16 7.27 6.76 7.10 -0.06 -0.8%Plantains 8.11 8.71 9.67 9.07 0.96 11.8%Greens 10.28 11.53 11.28 9.42 -0.86 -8.4%Cereals 2.58 2.79 2.91 2.68 0.09 3.6%

Rice 2.89 3.04 3.23 2.80 -0.09 -3.0%Corn 2.33 2.50 2.61 2.52 0.19 8.2%

Legumes 1.12 0.92 1.16 1.02 -0.10 -8.9%Beans 1.12 0.92 1.16 1.02 -0.10 -8.9%Tobacco 1.28 1.10 1.12 0.93 -0.35 -27.1%Citric Fruits 9.86 6.73 9.60 8.59 -1.27 -12.9%Other Fruits 10.11 9.71 7.84 8.89 -1.22 -12.1%Cocoa 0.51 0.53 0.50 0.29 -0.22 -43.2%

Principal Characteristics:(Non- Sugar Agriculture)

• Declining output levels (Table 1)•In part due to the impact of natural disasters, but alsoas a result of economicinefficiencies, the lack of incentives, bureaucratic constraints, etc.

• Falling yields (Table 2)•An indicator of insufficientCapital and labor inputs?

•Growing dependency on foodimports (particularly from the US)

Recent Policy Measures (2007 to Present)

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Recent Policy Measures Category Economic Impact

Increases in prices that Acopio pays for selected products (e.g. rice, milk, potatoes, etc.) (2007)

Price reform Increased outputImproved quality

Repayment of arrears owed by Acopio to farmers (2007) Price reform Increased output

Reorganization of Ministry of Agriculture (2007)-Closing 83 SOEs-Transforming 473 unprofitable units-Transfer of 7,300 workers-Reallocation of some 40,000 to other sectors

Structural reform

Administrative consolidationManagerial restructuring

Approval of Decree Law No. 259 (2008)- Transfers of non-productive State-owned lands to private farmers and cooperatives in usufruct

Structural reform

Increased outputImproved quality

Transfer of Acopio’s marketing functions in Havana to MINAGRI and MINCIN (2008-2009)

StructuralReform

Creation of State-operated retail outlets to sell limited inputs to farmers in convertible pesos (CUC)

Price reformStructural reform

Improved access to inputs

Introduction of small-scale, local, experimental projects in “suburban agriculture”

Structural reform

Limited increases in output/quality

Elimination of selected agricultural products from the rationing system – “price liberalization”

Price reform Increased outputImproved quality

Recent Performance (2008 – Present) - Mixed Results

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Output:

Mixed results, as it takes time for the reform measures to have tangible effects

Partial recovery in key areas such as: viandas, roots and tubers, rice, and other fruits

Increased non-State participation and share of total output? ---Too early to tell.

Yields:

Unlike selected outputs, yields have generally declined

Possible explanations? Insufficient labor and capital inputs

Low labor productivity

Technological obsolence?

2008 2009 2010Change

2008 - 2010 % ChangeViandas 2,150,700 2,236,000 2,250,000 99,300 4.62%Roots and tubers 1,392,500 1,565,600 1,515,000 122,500 8.80%Plantains 758,200 670,400 735,000 -23,200 -3.06%Greens 2,439,300 2,548,800 2,141,000 -298,300 -12.23%Cereals 761,700 868,400 778,900 17,200 2.26%

Rice 436,000 563,600 454,400 18,400 4.22%Corn 325,700 304,800 324,500 -1,200 -0.37%

Legumes 97,200 110,800 80,400 -16,800 -17.28%Beans 97,200 110,800 80,400 -16,800 -17.28%Tobacco 21,500 25,200 20,500 -1,000 -4.65%Citric Fruits 391,800 418,000 345,000 -46,800 -11.94%Other Fruits 738,500 748,000 762,000 23,500 3.18%Cocoa 1,100 1,387 1,709 609 55.36%

Table 3. Cuba: Non-Sugar Agricultural Output, Selected Crops, 2008-2010 Tons

2008 2009 2010Change

2008 - 2010 % ChangeViandas 7.69 6.34 6.20 -1.49 -19.4%Roots and tubers 7.10 6.36 6.21 -0.89 -12.5%Plantains 9.07 6.30 6.17 -2.90 -32.0%Greens 9.42 9.15 9.05 -0.37 -3.9%Cereals 2.68 2.07 1.94 -0.73 -27.5%

Rice 2.80 2.61 2.58 -0.23 -8.1%Corn 2.52 1.49 1.44 -1.08 -42.8%

Legumes 1.02 0.74 0.71 -0.31 -30.1%Beans 1.02 0.74 0.71 -0.31 -30.1%Tobacco 0.93 1.01 1.01 0.08 8.5%Citric Fruits 8.59 8.72 8.00 -0.59 -6.9%Other Fruits 8.89 8.16 7.86 -1.03 -11.5%Cocoa 0.29 0.27 0.32 0.03 11.1%

Table 4. Cuba: Non- Sugar Agriculture, Yields, Selected Crops (tons per hectare)

Recent Performance (2008 – Present) - Mixed Results (Cont’d)

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Table 5. Cuba: Sales in the "Mercado Agropecuario"January to December 2009Selected products Tons

Concepto Total State SectorNon-State

Sector

State Sector % of

Total

Non-State Sector % of Total

State/Non-State

Viandas 318,036.3 286,773.0 31,263.3 90.2% 9.8% 9.2Roots and tubbers 219,615.9 201,464.2 18,151.7 91.7% 8.3% 11.1

Potatoes 66,565.4 59,304.8 7,260.6 89.1% 10.9% 8.2Plantains 98,420.8 85,309.2 13,111.6 86.7% 13.3% 6.5

Greens 158,728.9 80,795.6 77,933.3 50.9% 49.1% 1.0Tomatoes 28,007.7 13,848.5 14,159.2 49.4% 50.6% 1.0

Onions 10,954.6 7,690.6 3,264.0 70.2% 29.8% 2.4Garlic 2,736.6 2,142.4 594.2 78.3% 21.7% 3.6

Rice 27,167.5 26,201.1 966.4 96.4% 3.6% 27.1Grains 11,446.9 10,041.5 1,405.4 87.7% 12.3% 7.1Citric products 13,259.5 9,036.2 4,223.3 68.1% 31.9% 2.1Other Fruits 41,374.1 27,794.5 13,579.6 67.2% 32.8% 2.0Total 593,865.5 455,316.1 138,549.4 76.7% 23.3% 3.3

State and Non-State Sectors as % of Total

Recent Performance (2008 – Present) - Mixed Results (Cont’d)

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Table 6. Cuba: Sales in the "Mercados Agropecuarios"January to December 2010Selected Products Tons

Total State Non-StateState

Sector as % of Total

Non-State as % of Total

State/Non-State

Viandas 333,496.1 286,773.0 46,723.1 86.0% 14.0% 6.1Roots and tubbers 228,130.0 201,464.2 26,665.8 88.3% 11.7% 7.6

Potatoes 62,447.1 59,304.8 3,142.3 95.0% 5.0% 18.9Plantains 105,366.7 85,309.2 20,057.5 81.0% 19.0% 4.3

Greens 151,076.5 80,795.6 70,280.9 53.5% 46.5% 1.1Tomatoes 28,256.5 13,848.5 14,408.0 49.0% 51.0% 1.0

Onion 10,767.4 7,690.6 3,076.8 71.4% 28.6% 2.5Garlic 3,042.3 2,142.4 899.9 70.4% 29.6% 2.4

Rice 27,593.9 26,201.1 1,392.8 95.0% 5.0% 18.8Grains 11,929.0 10,041.5 1,887.5 84.2% 15.8% 5.3Citrus Fruits 14,933.7 9,036.2 5,897.5 60.5% 39.5% 1.5Other Fruits 47,854.1 27,794.5 20,059.6 58.1% 41.9% 1.4Total 607,268.9 455,316.1 151,952.8 75.0% 25.0% 3.0

State and Non-State Sectors as % of

Results (2008 to the Present)

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y = 30.80x + 317.3R² = 0.950

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010

Figure 1. Cuba: Median Monthly (Nominal) Salary (in pesos)

Agricuture

589,000 privately-employed farmers

Aggregate income (2010):

4.9 billion pesos (or $197 USD)

Average (nominal) monthly wages (2010):

700 pesos (or $28 USD)

146,000 “natural persons” have received

land in usufruct since 2008

71,000 (or 48.6%) are “new farmers”

Self-employed workers: 300,000

Recent Policy Measures (2010 – Present)

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Agricultural Credits –The “Big Story for 2011” (and beyond?)

BANDEC (Banco de Crédito y Comercio): (Juventud Rebelde, July 10, 2011)

13,000 farmers (2% of total, but 8.9% of “new farmers”) have been approved for BANCEC –provided credit financing

Uses of credit financing: Working capital financing (WC = C/A – C/L)

Short-cycle crops: 18 month production cycle (revolving line of credit)

Long-cycle crops (ex. Sugar cane): 18 month amortization period

Live stock purchases: 18 to 42 month amortization period (excludes private sales)

Physical asset/capital investments: excludes costs to eradicate “marabu” but includes financing for crops rotation, equipment, and physical infrastructure

Sources of collateral: Expected sales receipts (projected revenues) – based on the estimated value of sales

agreements/contracts with the State

Income generated through “commercialization of agricultural products” as specified in Agreement 6853 (June/2010)

Any other (additional) source of income