The first British colonial possession in the Caribbean, St. Kitts with, to a lesser degree, Nevis, was among the earliest plantation economies in the region. Sugar production dominated the island for 350 years. According to Eric Williams in his From Columbus to Castro: The History of the Caribbean, 1492-1969, in 1897, when the peak of sugar production was long past, St. Kitts still had over 15,000 sugar workers, 136 factories, and 35 plantations with over 500 acres each.
What remains is a fragment of the former industry, but the extensive plantations of the St. Kitts Sugar Manufacturing Corporation (SSMC) still employed about 10 percent of the labor force , or 1,500 people, in 1994. In government hands since 1975, the SSMC loses money each year, and its output is subsidized by the government through the state-owned National Bank. According to the St. Kitts-Nevis Observer, production costs per ton are 25 percent higher than the price received from the European Union (EU), which offers the country a guaranteed annual quota of 15,600 tons. The United States also buys a fixed annual quota of sugar from St. Kitts-Nevis at above world market prices. But despite these preferential markets, the SSMC is a loss-maker, costing the government the equivalent of 3.5 percent of the GDP annually. In his 2001 New Year speech, Prime Minister Denzil Douglas spoke of the urgent need to reduce the SSMC's losses by divesting itself of its land and other assets to avoid a "national disaster."
The situation has been worsened by recent hurricane damage. In 1999 exports fell 24.7 percent from the previous year, totaling 17,178 tons and earning only US$9.6 million. This followed a brief upsurge in 1997, when production reached 31,374 tons. Bad weather conditions caused the tonnage of cane cut per hectare also to fall from 65 in 1998 to 53.5 in 1999. There is a recurring labor shortage in the industry since few younger Kittitians want to work long and hard hours for little reward. The government has been obliged to contract seasonal cane cutters from Guyana, and there have been complaints of low wages paid to these temporary workers and of their poor conditions.
The government has been encouraged by the IMF and others to diversify the country's agricultural output and to reduce the high food imports. There has been an increase in vegetable cultivation on St. Kitts, while Nevis produces sea-island cotton and coconuts. One successful by-product of the otherwise ailing sugar industry is cane spirit, a white rum exported to Europe or North America.