FOOD VS. FUEL: A FALSE DILEMMA FOR CUBA

FOOD VS. FUEL: A FALSE DILEMMA FOR CUBA
A SURVEY OF THE ISSUE
Antonio Gayoso

The objective of this essay is broadly to assess the
factors that determine whether the production of
biofuels from biomass could be viable in Cuba and
whether it could compete with food production.
This question is important in view of the significant
decreases that have occurred in Cuba's agricultural
and food production during the past several decades.
In particular, shortages of staple food products have
characterized the last twenty years and, although
famine conditions have never materialized, the country
has had to import foodstuffs it used to produce
before. In 2006, according to the Communist Party
official newspaper Granma, Cuba commercially imported
nearly 85 percent of its food needs. For more
than a decade, it has also depended on food donations
from the United Nations World Food Program
(WFP) to feed more than 700,000 families in the five
eastern-most provinces.
In addition, Cuba's capacity to import the food it
needs, as well as other critical goods, has severely deteriorated
with the collapse of key exports sectors,
particularly sugar, and the suspension of large subsidies
from the former Soviet Union. Currently, capacity
to import food has increased somewhat with the
subsidies from Venezuela. A large portion of these
food imports comes from the United States.
OVERVIEW
The potential dilemma between the production of
bio fuels, based on agricultural feedstock, and food
production has become a controversial issue for policy
makers. In this context, biofuels include ethanol
and biodiesel. Currently, strong interest in the production
of biofuels derives from several factors. To
wit:
First, the high price of oil prevalent during the past
few years, as the result of supply limitations agreed
upon by the Organization of Petroleum Exporting
Countries (OPEC). In addition, the world is experiencing
an apparently insatiable demand for hydrocarbons,
spearheaded by countries such as China and
India. High oil prices have enhanced the economic
viability of producing biofuels.
Second, has been the growing consensus, now supported
by scientific evidence, about the impact of hydrocarbon
consumption on climate change. Indeed,
most scientists now believe that continuous and increasing
use of hydrocarbons is a major factor in
global warming. This impact, if not abated, could
have significant negative effects on the world's ecology,
on agricultural productive capacity, and on food
production in most countries.
This last concern is important because, according to
the Food and Agriculture Organization (FAO) of the
United Nations, there are an estimated 850 million
people with diets well below internationally-accepted
minimum norms. Widespread decreases in food production
would make this situation worse. It is important
to note, however, that there is consensus on the
fact that poverty—lack of income—and not the level
of available food supply, currently adequate, is the
major cause of hunger in the world.
Food vs. Fuel: A False Dilemma for Cuba
213
Third, added to the potential impact of global warming,
is competition for productive land. A major concern
has been that production of biofuels, based on
agricultural feedstock, might divert agricultural land
and feedstock into biofuel production, thus decreasing
food supply and increasing the price of staples.
Recently, the price of both sugar and maize, main inputs
used to produce ethanol, has risen rapidly as demand
for them by ethanol distillers has increased significantly.
This is the core reason for the food vs.
fuel potential dilemma.
Finally, economic and political vulnerability. That is,
the concern, on the part of oil importing countries,
particularly the United States and the European
Union (EU), that continuous dependency on oil
from a few, often strongly adversarial and unstable
producers, is not politically advisable and could lead
to political instability.
These preoccupations have resulted in government
policies that emphasize the production of alternative
fuels, mainly ethanol and biodiesel, which could decrease
the demand for hydrocarbons. These actions
have also led to governments' decisions to set mandatory
levels of use of these alternative fuels in the
short to medium term. Additional attention has been
placed on research on the direct uses of biomass for
the production of energy, a practice that has been extensively
followed by the world's peasantry in their
households and by many countries in some of their
industries.
These issues and factors are important for Cuba. The
country does not produce but one-half of the oil required
to meet its current energy needs, even for an
economy at a depressed level of activity. Cuba, however,
has had long—albeit limited—experience in
the production of ethanol from sugar and of its use
as a supplement for gasoline, as well as in the direct
use of biomass (sugar cane bagasse) to produce energy
in the sugar mills' boilers. Because of the dismal
status of the island's agriculture and food sector, the
food vs. fuel dilemma could be real for Cuba, should
there be a policy shift to emphasize ethanol production
from sugar cane and other feeddstock.
Whether or not it is an issue would depend on a
thorough assessment of suitable land availability,
yields, and technologies available or used in the
country or, said in simpler terms, economic feasibility
of different alternatives, under different policy
frameworks and organizational sectoral structures.
Only such an assessment would answer the question
of whether Cuba has the physical and ecological capacity
to produce most of the food it requires while
also producing feedstock for a biofuel industry.
TECHNOLOGY CONSIDERATIONS
Technologies used to produce ethanol from corn
and cane sugar are well known and relatively straightforward.
In the case of biodiesel, currently derived
from oil seeds such as rapeseed, as well as from palm
oil and soybeans, the technology is also simple but
more costly, on a per unit basis, than that used for
ethanol. For both ethanol and biodiesel production,
even with oil at $70 a barrel, production is not cost
competitive with hydrocarbons in most countries.
Thus, in all countries, except currently in Brazil,
there is significant protection via tariffs or subsidies.
As the price of oil inches its way to $100 per barrel,
however, cost ratios will change in favor of biofuels.
Ethanol can also be produced from a wide variety of
other feedstock. These include prairie grasses, renewable
biomass and residues from forestry and agricultural
cropland, and even municipal wastes. Many
of these agriculture-based sources grow on marginal
lands, not suitable for food crops. Therefore, their
use as feedstock would not divert land from food
production. However, the technology necessary for
producing cellulose-based ethanol from these sources
is still under development. According to rough estimates
by the U.S. Energy Information Administration,
the capital costs associated with cellulosic
ethanol production are several times greater than
those for conventional ethanol production.
LOCATION OF CURRENT BIOFUEL
PRODUCTION
Brazil and the United States are the world's largest
producers of ethanol, the first relying on sugar cane,
and the second mostly on maize, a basic food and
feedstuff. According to a recent World Bank study
on trade and biofuels, prepared by its Energy Sector
Cuba in Transition • ASCE 2007
214
Management Assistance Program (ESMAP), only
Brazil's ethanol program has attained economic sustainability,
as the country, after two decades, no longer
uses subsidies or protection to support growth of
the industry. Certain tax incentives, favoring the use
of gasohol or pure ethanol as transportation fuels, remain
though.
Close to 50% of the sugar Brazil produces goes into
ethanol production. Parallel to this, its automotive
industry has developed a variety of cars and trucks
that can use a wide range of combinations of ethanol
and gasoline. Ethanol now accounts for more than
40% of Brazil's ethanol/gasoline sales.
In addition to sugar cane, ethanol can be produced
from other food stock such as maize, sugar beets,
wheat, cassava, and other starches. Sugar, however,
seems to be the most cost effective raw material. In
the United States, ethanol production originates
mostly from maize. This crop is heavily protected by
a tariff on ethanol imports, without which ethanol
production from maize would be unprofitable. It is
because of this tariff, and the government-mandated
use of ethanol as a supplement to gasoline, that the
industry subsists and grows.
Biodiesel production, concentrated in the EU and
based mostly on rapeseed oil, is still far from commercial
viability and remains heavily underwritten by
tax incentives and trade protection. In fact, where it
is available in Europe, mainly Germany and Switzerland,
the price of biodiesel at the pump is commonly
lower than that of regular diesel. Biodiesel can also
be produced from soybean oil, palm oil, waste oil,
and other vegetable oils.
Non-EU countries, which have begun production of
biodiesel, include Malaysia, Indonesia, the Philippines,
and India. Brazil is assessing feasibility of producing
biodiesel from soybeans and from low-quality
coffee beans. In India, with millions of hectares of
marginal lands, the use of jathropa, an oil seed that
grows well in such land, is undergoing experimentation.
There is widespread concern that in these countries,
cropland will be diverted to the production of biodiesel
feedstock. Furthermore, fears abound about deforestation
in the Amazon and in the Indonesian forests,
in order to plant soybeans and oil palm, because
that shift would increase the environmental and ecological
costs of producing biofuels.
IS THE THREAT AGAINST FOOD
PRODUCTION TRULY SERIOUS?
According to a study by the UN Foundation, as well
as the FAO (OECD and FAO, Agricultural Outlook,
2007–2016), there are sufficient land areas worldwide
to increase production of feedstock for biofuels
without significantly affecting the adequacy of the
food supply. The development of cost effective cellulosic
ethanol technology would decrease pressure
on cropland, as agricultural residues could then become
major feedstock to the industry. For instance,
agricultural residue from maize areas could be the
source of ethanol without affecting the use of maize
grain for food and feed.
By way of illustration, in the United States, there are
about 400 million acres under cultivation. These areas
consistently produce surplus food crops. However,
it is estimated that one half of nation's 2.26 billion
acres have some potential for biomass production. In
addition, most researchers believe that increases in
food crop yields will continue that will make feasible
to feed more people from a given area cropped. It is
also feasible to use residues from the production of
ethanol from biomass as cattle feed, thus reducing
the need to use maize for this purpose.
In addition, from an income standpoint, given that
the major cause of hunger is poverty, increased demand
for biofuels is likely to increase prices paid to
producers of feedstock and/or result in more paid
employment. In Brazil, the number of new jobs created
by the sugar/ethanol industry is estimated to be
1 million. Thus, more people will be able to access
the food they need.
There are social problems that could/will arise. For
example, some NGOs in Brazil, including religious
ones, submit that working conditions in many of the
sugar plantations in that country are just slightly better
than slavery.
Food vs. Fuel: A False Dilemma for Cuba
215
THE CUBAN CASE
Cuba has a long history of using biomass to produce
energy and other products. In addition to sugar, the
sugar cane industry has produced ethanol for fuel as
well as molasses for cattle feed, and rum. Sugar cane
bagasse, the residue from the cane harvest, was traditionally
used to run the sugar mill boilers, either by itself
or by mixing it with bunker oil. This practice
continues to this day. Bagasse was also used, during
the decade of the 1950s, to produce newsprint and
compressed boards. During the same decade, ethanol,
mixed with gasoline at a 10/90 ratio, was sold as
vehicular fuel. At the time, it was called the "national
fuel." No data is available regarding what share of
consumption this fuel accounted for.
During the last 15 years, sugar production in Cuba
has decreased precipitously. In 1959, Cuba was the
world's largest exporter of sugar and literally dominated
the international market, with total exports of
sugar surpassing 5 million tons per annum. In contrast,
the 2007 sugar harvest, at about one million
tons, was the lowest in more than 100 years, sufficient
only to cover local (rationed) consumption of
roughly 700 thousand tons and not quite enough to
fulfill export contracts with China.
After the 2002 government decision to restructure
the sugar industry, the number of sugar mills decreased
drastically. Only 42 mills participated in the
2007 harvest. More than half of the 161 mills active
in the 1980s have been either dismantled or literally
abandoned to rust. More than 200,000 workers have
been released by the industry. In 2005, the government
announced new investments to reactivate the
sugar sector in order to take advantage of higher sugar
prices. That effort, if it was carried out, seems to
have produced nothing.
Agricultural yields have also decreased radically. Cuban
fields now yield less than 30 tons of sugar cane
per hectare compared with a world average of 63
tons per hectare. Concerning production of sugar,
the Cuban government has reported that, in 2006, industrial
yields averaged less than 11%, compared
with the average 12.83% reached during the decade
of the 1950s.
Underlining these decreases in productivity, there
has been a serious deterioration in the quality of soils
in sugar cane plantations. Mismanagement of harvesting
machinery has resulted in widespread soil
compacting and, in many areas, water-logging. Too
late and haphazard harvesting of sugar cane have destroyed
many of the cane plants that were traditionally
able to produce for several years without replanting
Furthermore, over one million hectares of land
(about 2.5 million acres), of the total 1.8 million hectares
(about 4.5 million acres), formerly planted with
sugar cane, have been abandoned and taken over by
marabú, a variety of acacia, a deep-rooted bush that
produces nothing of value and is very difficult to
eradicate. Thus, close to 2 million hectares of land
could be used in the future for an integrated sugar industry:
one that could produce sugar, ethanol, paper,
cattle feed, and other products without competing
for foodstuff cropland, provided that a return to earlier
productivity levels are achieved. The possibility
of directly using sugar cane biomass to produce surplus
electricity, in addition to fueling the mill during
the harvest, has also been technically proven profitable.
The international market for sugar, though, has
changed radically since the beginning of the Revolution.
In 1959, Cuba exported more than three million
tons of sugar to the United States, under a preferential
quota. In 2006, total U.S. imports of sugar were
lower that 1.6 million tons. The United States now
produces close to 8 million tons of sugar, from both
sugar cane and sugar beets. Furthermore, production
and consumption of non-sugar sweeteners has exploded.
For domestic political reasons and the present allocation
of import quotas, it is unlikely that U.S. domestic
production would decrease to permit Cuba to become
again a highly significant player in U.S. sugar
imports. An additional factor is that, under the
North American Free Trade Agreement (NAFTA)
after 2008, Mexican sugar will have unrestricted access
to the U.S. market. Other than cane sugar, however,
U.S. demand for ethanol and other sugar caneCuba
in Transition • ASCE 2007
216
based products could provide the new market for a
renewed Cuba's sugar cane sector.
SUGAR OR ETHANOL?
I have asserted that, if former sugar cane areas are recoverable,
Cuba will have close to 2 million hectares
of land available to produce sugar cane. As mentioned
before, the historical experience of Cuba and
Brazil shows that many products can be obtained
from sugar cane, in addition to sugar itself, for example
molasses for cattle feed, newsprint, rum, etc. All
of these products can be produced using the entire
cane plant, without competing for land for food
crops and using existing technology.
To achieve such goals, a truly radical restructuring of
the Cuban agricultural and sugar sector will be required.
This restructuring will require a drastic policy
shift that can/should be rapidly implemented regardless
of the government in power. There needs to be a
clear government policy that establishes the goal of
rescuing the sugar industry, which identifies the actions
proposed to reach these goals.
In my opinion, overall, agricultural land and the sugar
mills should be privately owned, the property of
the producers, as individuals, cooperatives, or corporations.
Foreign direct investment and join ventures
in the sector should be legal, subject only to key necessary
regulation and taxation. The market for labor
should be free. That means that owners hire workers
and pay them directly. Labor unions should be legal
and independent from the state. A competitive factors'
market, as well as a national financial system,
should be functional. A functioning free market determining
prices should be the rule. Intermediation
should be legal and highly competitive. Contracts
should be enforceable.
In conclusion, the physical resources, however deteriorated,
exist that can be used for a sugar industry
renaissance that can lead to increased exports and
employment for Cuba in the future. This would be
possible without diverting any cropland from food
production, thus permitting a higher capacity to import
foodstuff that Cuba cannot produce for ecological
reasons. In this effort, the role that capital, market,
and technical know-how of Cuban exiles can
play cannot be overemphasized, but will require a
soft touch to insure its full participation in the process.
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