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Recent Developments in the Cuban Citrus Industry1 Ronald P. Muraro and Thomas H. Spreen2 1. This document is FRE 266, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida. First published: 1996. Reviewed: July 1999. Please visit the EDIS Web site at http://edis.ifas.ufl.edu. 2. Ronald P. Muraro, professor, Citrus Research and Education Center, Lake Alfred, FL; Thomas H. Spreen, professor, Food and Resource Economics Department, Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, 32611. This paper was presented at the 109th Annual Meeting of the Florida State Horticultural Society on November 5, 1996, in Orlando, Florida. The Institute of Food and Agricultural Sciences is an equal opportunity/affirmative action employer authorized to provide research, educational information and other services only to individuals and institutions that function without regard to race, color, sex, age, handicap, or national origin. For information on obtaining other extension publications, contact your county Cooperative Extension Service office. Florida Cooperative Extension Service/Institute of Food and Agricultural Sciences/University of Florida/Christine Taylor Waddill, Dean. Developments in the former socialist countries in the Soviet Union and Eastern Europe since 1989 have had a dramatic impact on the economic situation in Cuba. These developments, in turn, have placed a great deal of pressure upon the Cuban government. In response, the Cuban government has entered into a process of economic reforms. These reforms are an attempt by the Cuban government to deal with the realities of competing in the world market for citrus. The objective of this paper is to present a recent history of the Cuban citrus industry and to discuss the economic reforms as they relate to citrus in Cuba. Historical Perspective Citrus production was introduced to Cuba by the Spaniards at the end of the fifteenth century. During the period that Cuba was under Spanish rule, citriculture had little economic importance. Sugarcane, tobacco, and coffee were the major agricultural crops grown for export by the Spaniards. After Cuba gained its independence from Spain in 1902, foreign capital investment in citrus, particularly from the United States, introduced new technologies that resulted in increased citrus production. In 1959, less than 30,000 acres of citrus could be found in Cuba. In the aftermath of the revolution that brought the Castro regime to power, most land used for agriculture was expropriated by the government. Thus, a large land base was brought under government control. Citrus was identified as a crop to be emphasized and used for export. Consequently, citrus acreage expanded rapidly as shown in Figure 1. By the 1974-75 season, approximately 300,000 acres were devoted to citrus, and Cuba was ranked among the five largest citrus-producing countries in the Western Hemisphere. The major citrus-producing regions in Cuba are shown in Figure 2. Citrus is grown throughout the Cuban island. The two citrus-producing regions that have the greatest impact on the export market are Jagey Grande and the Isle of Youth. Jagey Grande is the largest citrus planting in Cuba with more than 100,000 acres designated for the production of oranges and grapefruit. The Isle of Youth, which is known for producing high-quality grapefruit, has more than 37,000 acres designated for citrus production. These two regions represent approximately 44 percent of the total citrus area in Cuba. The remaining citrus production regions provide citrus fruit primarily for the domestic market.
Recent Developments in the Cuban Citrus Industry 2 Figure 1. Estimated Total Citrus Acreage in Cuba. (Note: Acres represent total land area designated to citrus, not planted or tree acres.) Cuba's Citrus Acreage The estimated total citrus acreage in Cuba from 1958-59 through 1993-94 is shown in Figure 1. Note that the total acreage represents the land area designated for citrus and not the "net land (grove) area" planted with citrus trees. In other words, approximately 17 percent of the total land area includes roads, windbreaks, etc., which must be subtracted to estimate total grove area. Published citrus acreage in Florida represents net planted or tree acres. In Table 1, adjustment factors are applied, giving total tree acres and the citrus tree inventory in the 1993-94 season. In that season, orange acreage was approximately 139,500 acres, or 58.5 percent of total citrus acreage. Just over 72,000 acres of grapefruit were planted, with the remainder devoted to lemons, limes, and specialty fruit. Also note the high proportion of orange acreage that is bearing. This acreage suggests that any expansion in orange production will not come from large tracts of newly planted groves. Almost 20 percent of the grapefruit acreage is listed as nonbearing. The higher proportion of nonbearing area for grapefruit can be attributed to the fact that some white seedy and white seedless grapefruit trees have been removed and replanted with red and pink seedless varieties. Cuba Citrus and the Dissolution of the Soviet Bloc During the period of the expansion of citrus production, Cuba exported citrus to the former socialist countries of Europe in a barter arrangement. Cuba would generate credits with its exports and realize debits with its imports, which included machinery and oil. The relative valuation of citrus compared to the cost of imported products was such that its "price" was significantly higher than world citrus prices. As stated by one prominent member of
Recent Developments in the Cuban Citrus Industry 3 Figure 2. Production Area for Citrus in Cuba by Province. (Note: Total land area in citrus measured in acres. Prod. refers to land area with bearing trees measured in acres.) the Cuban citrus industry, "our fruit was bought; it was not sold." With the disintegration of the Socialist Bloc and the resulting financial hardship on the Soviet Union, the barter arrangement with Cuba ended in 1990. The result was a major contraction in the Cuban economy. Between 1990 and 1994, Cuba's gross national product (GNP) fell by an estimated 50 percent. Citrus production was also adversely affected. Production dropped to 15.2 million boxes in 1993-94, and the estimated production area contracted to 313,500 acres. While the citrus industry enjoyed a boom in the 1970-90 period, it thrived in isolation from competition from other citrus-producing regions. As such, when this isolation ended in 1990, the industry was not able to deal with the realities of competition in free markets. The industry had little marketing expertise and had paid scant attention to post-harvest issues. Production and marketing were not well-coordinated. Soon it was recognized that Cuba's citrus sector lacked the expertise to compete in the world citrus market arena. The result was a reorganization of the citrus operations, allowing for joint ventures with outside investors. A comparison of Florida and Cuba citrus acreage and citrus trees planted is shown in Table 2. Florida's total citrus acreage (853,700 acres) and total citrus trees (103.7 million trees) are 3.5 times and 4.3 times greater, respectively, than Cuba's. Total orange acreage (653,400 acres) and orange trees (81.6 million trees) are more than 4.5 times and five times greater, respectively, than those in Cuba. Likewise, Florida's grapefruit acreage (146,900 acres) and grapefruit trees (15 million trees) are two times and almost three times more, respectively, than Cuba's. Average tree density per acre in Florida is 121 trees whereas in Cuba the average tree density is 100 trees per acre. In Florida's southern citrus production regions, the tree density averages 145 trees per acre. Cuba's Citrus Production Cuba's citrus production from 1988-89 through 1993-94 is shown in Figure 3. Total Cuban citrus production peaked in 1989-90, with approximately 25 million boxes of citrus produced. Since 1990, citrus production has declined each year with the 1993-94 total production estimated at 15.2 million boxes. There is some indication that Cuba's citrus production has stabilized. Cuba's 1993-94 estimated total citrus production and utilization is shown in Table 3. Cuba produced
Recent Developments in the Cuban Citrus Industry 4 Figure 3. Orange and Grapefruit Production in Cuba. 15.2 million boxes of citrus in 1993-94. Approximately 47 percent of the citrus production was exported as processed juice, with 15.8 percent marketed as fresh citrus exports and the remaining 31.3 percent utilized in the domestic fresh fruit market. Oranges (8.6 million boxes) and grapefruit (6.1 million boxes) accounted for almost 97 percent of total citrus production. Recent Changes in the Organization of the Cuban Citrus Industry Since the economic collapse of the Cuban economy and the disintegration of the Soviet Bloc, a number of important changes have been implemented in the Cuban citrus industry. These include joint ventures, reorganization of state farms, and evaluation of existing production area. Once the barter arrangement with the former Soviet Bloc countries was modified, resulting in a major decline in the effective price received for Cuban citrus exports, there was a realization that Cuba would have to compete in the Western European market. There was also a realization that the industry lacked the marketing expertise necessary to effectively compete with Florida, Israel, Spain, and other major suppliers to the European market. Thus, Cuban law was modified to allow the formation of joint ventures and economic associations with foreign companies. The major difference between a joint venture and an economic association is that, under a joint venture, a new company is formed and the Cuban government and its foreign partner(s) become joint owners of the company. Under an economic association, an exclusive marketing agreement is signed in which Cuba provides fruit and the foreign company provides marketing services. To date, there appears to be little difference in the actual functioning of these two arrangements. As shown in Table 4, four foreign ventures have been formed in the Cuban citrus industry. The oldest, and probably largest, foreign presence is the Israeli involvement at Jagey Grande. Jagey Grande is the largest state farm for citrus in Cuba. Through the BM Group, a private Israeli company, fresh fruit is packed at Jagey Grande under the "Cubanita" label and marketed in Western Europe. To date, only fresh grapefruit is being marketed by the Israelis. The Israelis also operate a processing plant at Jagey Grande in which both oranges and grapefruit are processed. Concentrate juices are marketed primarily in Europe in bulk. There is also a packaging plant at Jagey Grande that is discussed elsewhere in this paper. The amount of Israeli capital invested at Jagey Grande is unknown. There are Israeli technicians who provide expertise on grove care, in the packing plant operation, and in the processing plant.
Recent Developments in the Cuban Citrus Industry 5 The Israelis are also involved in the decision to remove existing white seedy and seedless grapefruit trees and to replant with red seedless varieties, primarily Star Ruby. We could speculate that, given Israel's success in marketing red seedless grapefruit in Western Europe, they seek to increase the red seedless grapefruit supply from Cuba. The Pole Association, based in Chile, entered into an economic association with the state citrus farm located on the Isle of Youth. Before the revolution, this island was known as the Isle of Pines and is located off the southwest coast of the main island that forms Cuba (Figure 2). In the 1950s, the Lykes Corporation had established a significant planting of grapefruit on the island. After the revolution, production expanded, and by 1990, there were more than 30,000 acres of citrus on the island. The extent of the involvement of the Pole Association on the Isle of Youth is not known. It is reported that Chilean technicians are present on the Isle of Youth and are likely involved in both citrus production and packing. Fruit is marketed under the Pole label. A Chilean group, the I.N.G. Company, has formed an economic association with a juice-packing facility located near the processing plant at Jagey Grande. The packing facility packs a wide range of juice productsincluding orange, grapefruit, banana, papaya, and mangoin tetrapack (aseptic) under the "Tropical Isle" label. These products are marketed to the tourist sector in Cuba and elsewhere in the Caribbean. The fourth foreign presence in the citrus industry in Cuba is Lola Fruit, S.A., a Greek Company that has formed a foreign economic association at Ciego de Avila. Ciego de Avila is located near the center of Cuba, east-southeast of Havana. As shown in Figure 2, there are two state farms located near Ciego de Avila that together have approximately 15,000 acres of citrus. A fresh packing facility and a processing plant are located at Ciego de Avila. Lola Fruit is involved in production, fresh packing, and processing. Lola Fruit markets fruit primarily in Europe under the Lola label. A second major step taken by the Cuban government is the reorganization of state farms. Between the mid-1960s and 1990, large state farms dominated all sectors of agriculture in Cuba. In 1993, there was a decision to break up some of the large state farms and to turn over partial control of these smaller production units to the farm managers and workers. These new units are called UBPCs, or basic units of productive cooperation. Based upon our interviews with Cuban government officials, UBPCs will not operate autonomously but will be given more decision-making power than they are given under the state farm system. A state company will still operate in proximity to several UBPCs. The state company will sell inputssuch as fertilizer, pesticides, and fuelat state-controlled prices to the UBPC. The UBPC manages the grove and conducts the harvest. The UBPC will be obligated to sell fruit to the packing facility operated by the state. It is our understanding that the state will set a quota. Production in excess of the quota may be sold, most likely through a "free" agricultural market, where prices are not directly controlled by the government. To our knowledge, the UBPC cannot sell fruit on the export market without dealing with a state-run packing or processing facility. The third major step taken by the Cuban citrus industry is an evaluation of the existing production area. As shown in Table 2, the total land area devoted to citrus in 1990 was more than 350,000 acres (273,000 net tree acres). The expansion of the industry from less than one-tenth of this total took place over a period of 25 years; mistakes were made. The most significant problem was the wide use of noncertified rootstock. Thus, a large proportion of the existing tree inventory in 1990 was vulnerable to disease. Another problem was that, once the special marketing arrangement with the Soviet Bloc ended, access to low-cost fuel and petroleum-based inputs, such as fertilizer and pesticides, was curtailed. Cuba has not developed the domestic capability to produce sufficient quantities of agricultural inputs to meet the demands of its agriculture, hence it must import nearly all of these inputs. With foreign exchange scarce, there was a realization that sufficient inputs would not be available to adequately care for 273,000 acres of citrus.
Recent Developments in the Cuban Citrus Industry 6 Thus, a decision was reached to retrench the industry. As reported by Nova (in Spreen et al.), the plan implemented at Jagey Grande is typical of the scaling-back of the citrus industry in Cuba. At Jagey Grande, they have allocated existing groves into three priority classifications. Priority I: 8,000 hectares (20,000 acres) producing fruit destined for the export market; managed under full grove care. Priority II: 12,000 hectares (30,000 acres) producing fruit that will be processed; less care compared to Priority I but focused toward production of adequate juice yields. Priority III: 17,000 hectares (42,000 acres) producing fruit destined for internal consumption; managed under minimal care. It is possible that some of the land area in Priority III will be abandoned. The implications of the prioritization of groves include a continued contraction in the land area devoted to citrus. As shown in Figure 3, there was a small decline in citrus acreage between 1990 and 1994. It is likely that this downward trend has continued although more recent tree inventory numbers are not available. Another implication is the attempt to increase yields on the remaining acres. Citrus yields in Cuba are generally abysmally low, with yields ranging from 7 to 10 metric tons per hectare. These yields are approximately one-fifth of those realized in Florida, one-half of those observed in Brazil, and lower than the reported yields in Mexico. Fresh Citrus Packing The fresh citrus packing industry in Cuba began in the 1920s with fresh citrus exports to the North American market. The packing industry exhibited little growth until the 1970s when citrus production and export volume increased rapidly. Packing capacity was increased to handle the large volume of fruit being shipped to the Soviet Union and the socialist countries of Eastern Europe. However, since 1990, packinghouse utilization has declined, with several packing facilities no longer in operation. Total fresh citrus packing capacity in Cuba is 20.3 million boxes (830,400 metric tons) per year. In 1993-94, only 15 percent of total packing capacity was being utilized. Packing facilities at three citrus production regions account for about 84 percent of the total fresh citrus packed. Jagey Grande packs the largest volume of citrus, both oranges and grapefruit. There are seven packinghouses at Jagey Grande with a total annual packing capacity of 8.7 million boxes (357,000 metric tons). Approximately 1.76 million boxes (70,200 metric tons), or 20 percent of total capacity, were packed in 1993-94. Most of Cuba's grapefruit is packed on the Isle of Youth. Total annual packing capacity in this production region is 2 million boxes (80,000 metric tons), with 368,000 boxes (15,000 metric tons), or 19 percent of total capacity, packed in 1993-94. The Ariamao citrus production region ranks third in fresh citrus packed. Of total packing capacity of 772,000 boxes (31,500 metric tons), 314,000 boxes (12,800 metric tons), or 41 percent of capacity, were packed in 1993-94. As fresh exports increase, utilization of the packing facilities of these three citrus packing regions is expected to increase. Citrus Juice Processing Historically, citrus production in Cuba was targeted for the fresh export market. Juice processing was primarily for the utilization of fresh fruit eliminations, and juice quality was secondary. However, beginning in 1986-87, juice processing capacity was increased so that higher-quality fruit could be delivered directly to the processing plants from the field. Currently, there are three citrus juice concentrate plants designated for processing oranges and grapefruit. The largest processing plantwhich has 30 extractors and three evaporators with a combined evaporation capacity of 90,000 pounds per houris located at Jagey Grande. On the Isle of Youth, there is one processing plant with 20 extractors and one evaporator with an evaporation capacity of 20,000 pounds. The third processing plantwhich has 20 extractors with an evaporation capacity of 40,000 poundsis located at Ciego de Avila. All of these plants are capable of producing frozen concentrate of 65 brix for oranges and 58 brix for grapefruit.
Recent Developments in the Cuban Citrus Industry 7 Essential oils and citrus pulp are produced at these facilities. All juice is exported in 55 gallon drums. Concluding Comments The citrus industry in Cuba provides valuable export products that are being marketed in the major international markets, primarily Europe. Cuba's warm climate and early growing season allow earlier access to the European fresh grapefruit market than do other growing areas, such as Florida. The preferential barter-arranged prices paid to Cuba prior to 1990 by the former Soviet Union and the socialist Eastern European countries did not reflect the demands of a competitive market system. This market arrangement provided no incentive for high fruit quality, efficiency in fruit handling, and promptness in delivery. After the collapse of the Soviet Union, Cuba found itself ill-equipped to compete in the free market international arena. The lack of market expertise led to a reorganization of the citrus industry in Cuba. Joint ventures and economic associations were formed with foreign companies to provide needed know-how for international marketing. These partnerships are enabling Cuba's citrus industry to focus on the most productive citrus planting, which will lead to higher fruit production through more efficient utilization of limited inputs. Large state farms have been divided into several smaller units, and grove management has been decentralized. Under these new strategies, Cuba's citrus industry may be able to attain the total citrus production of nearly 25 million boxes that it achieved in 1990. References Florida Agricultural Statistics Service. -94 Citrus Summary." January 1995. Spreen, Thomas H., Armando Nova Gonzlez, and Ronald P. Muraro. "The Citrus Industries in Cuba and Florida." International Working Paper IW 96-2, Food and Resource Economics Department, IFAS, University of Florida. January 1996. York, Allison, Ronald P. Muraro, and Thomas H. Spreen. "The Inter-American Citrus Network: A Compilation of Citrus Data from the Americas." Economic Information Report EI 94-5, Food and Resource Economics Department, IFAS, University of Florida. December 1994.
Table 1. Estimated Total Citrus Acres and Trees by Variety in Cuba, 1993-94. Recent Developments in the Cuban Citrus Industry 8 Variety Total Land Area Net Orchard/ Grove Area Net Tree Area % of Total Total Citrus Trees -Acres-1,000 Trees--% BearingOranges 183,525152,326139,479 58.515,79289.8 Grapefruit 94,972 78,82772,17930.35,25680.3 Specialty Citrus 6,777 5,625 5,151 2.2 47650.0 Lemons & Limes 28,316 23,50221,520 9.0 2,54882.2 Total 313,589 260,279 238,328 100.0 24,072 86.1 Source: Armando Nova Gonzlez (University of Havana); Corporacion Nacional del Citrico (Cuba).
Table 2. Total Tree Acres and Citrus Trees by Variety in Florida and Cuba, 1993-94. Recent Developments in the Cuban Citrus Industry 9 Variety Florida Citrus Industry Cuba Citrus Industry Florida Citrus Industry Cuba Citrus Industry -Tree Acres-1,000 TreesOranges 653,370139,47981,61415,792 Grapefruit 146,91572,17915,004 5,256 Specialty and Other Citrus 53,45726,671 7,115 3,024 Total 853,742 238,328 103,733 24,072
Table 3. Estimated Total Production and Percent Utilization of Citrus in Cuba, 1993. Recent Developments in the Cuban Citrus Industry 10 Estimated % Utilization Fresh Market Variety Production Domestic Export Processed Market MT -%Oranges 350,000 64.112.8 23.1 Grapefruit 250,000 34.521.3 44.2 Specialty Citrus 6,000100.00.0 0.0 Lemons & Limes 14,000 88.1 .5 11.4 Total 620,000 52.9 15.8 31.3 Source: Armando Nova Gonzlez (University of Havana); Corporacion Nacional del Citrico (Cuba).
Table 4. Cuba: Foreign Investment in Citrus, 1990-96. Recent Developments in the Cuban Citrus Industry 11 Cuban Agency Firm & Country Year of Association Investment Type Major Activity (Brand Name) Corporacion Nacional de Citricos BM Israel1960s, renewed in 1990 Economic Association 92,000 acres in Jagey Grande (Cubanita) Corporacion Nacional de Citricos POLE S.A., Chile1991Economic Association Prod./Mktg.-esp. grapefruit, 35,000 acres in Isle de Youth (Pole) Corporacion Nacional de Citricos I.N.G., Chile 1992Economic Association Processing 30 mil. liters in Jagey Grande (Tropical Island) Corporacion Nacional de Citricos Lola Fruit, S.A., Greece 1993 Joint Venture Prod., Mktg., & Processing in Ciego de Avila