Hurricane Ike and Cohibas

Hurricane Ike has been a disaster for Texas (although thankfully Austin escaped essentially unscathed), and it has had an interesting side effect on me.

One of the treats of being in Europe is the ability to buy Cuban cigars, particularly Cohibas, which are, in my view, the best cigars in the world.

Ike hit Cuba hard — and apparently destroyed a substantial amount of the cigar-wrapper crop. The price of this input into my favorite Cuban cigar will increase, causing the supply of Cohibas to shift leftward for a while and the price to rise in the short run. That increase will be temporary because Cuba will replant the crop.

What would be permanent would be the rightward shift in demand when the U.S. finally resumes trade relations with Cuba. Legalizing Cuban cigars will surely raise price.

While that would be unfortunate for me when I’m in Europe, paying a higher price in the U.S. would still be better for me than the infinite price at which Cohibas now sell at home under the trade ban!

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  1. Jared says:

    Well, firstly, US citizens already buy a large percentage of Cuban cigars illegally. So, legalizing trade isn’t necessarily going to change the price all that much. Secondly, American citizens are prohibited from buying Cuban cigars at home OR ABROAD. So, while it is de facto decriminalized, the government does often make examples of people who buy large quantities of Cubans (usually about 2 per month). Anyway, as a fellow Texan and cigar lover, be sure to only shop at LCDHs or you will oftentimes be buying fakes (even abroad).

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  2. Christian says:

    I wonder if Cuban cigars had never been banned in the US if you would still hold Cohibas in such high regard.

    I suspect that part of your like for them stems from their being unavailable in the US.

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  3. Nuclear Mom says:

    May we speak for a minute about Ike’s effect on gas prices? Everyone I speak to is irate about the perceived “gouging” and “unfairness” of raising the price of gas to reflect a shortage. I try to tell them I would rather have gas available at $8 a gallon than no gas available at $3.50 a gallon. Then it’s my decision how badly I need to make that trip — no to Starbucks, yes to the hospital and so on. Even though they acknowledge the logic, they keep coming back to “but it’s not fair.”

    I have been very interested in the studies showing perceived fairness is an innate need for human interaction. But nobody seems to be talking about the benefits to the public of maintaining SOME availability, even at high cost. Economics loses again.

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  4. Joseph Logan says:

    Christian raises a useful point, but as a resident of the Netherlands (US citizen, though), I still hold Cohibas in very high regard even though I can buy them across the street easier than you could buy Marlboros at a US 7-11. Anything off-limits must certainly raise its desirability above whatever it otherwise might be, but Cohiba’s consistent rank within the global market surely speaks to the quality of the product.

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  5. Jason says:

    All very true, but keep in mind the effects of this hurricane will not really be felt until about 3-5 years from now when the recently destroyed crop would have been ready to use for rolling cigars. The tobacco must be cured and aged first and that takes time. If your normal retailer is raising prices now because of the recent hurricane, then that tells you that he either doesn’t know his business or he doesn’t think his customers do.

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  6. Chris says:

    Don’t forget that when the trade ban is finally lifted the presence of Dominican and Honduran made cigars using the same brand names as many Cubans will touch off one of the largest trademark lawsuits in the history of tobacco.

    Brands names owned by Altadis will probably stay on the market since they own a 50% interest in the Cuban cigar making company Habanos SA, but I fully expect Altadis and Habanos to pursue legal action against other companies using Cuban names.

    This would include General Cigar which makes a Dominican version of the Cohiba.

    It might be a while before you see those babies in American tobacconists’ humidors.

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  7. Jeremy says:

    All legality issues of Cuban cigars with respect to the US embargo aside, I don’t think there will be as significant of a shock to the pricing as suggested. The length of the production process should for the most part cushion the pricing effects (it takes as long as several years for tobacco to be turned into cigars), but may result in a reduction in supply for a few years. Prices may rise, but this also depends on which types of tobacco leaves were most affected by the storm as some are more vital to cigar production. Additionally, because of the high price of Cohibas and presumably high margin for Cuba, the shortage will probably affect less popular marcas and vitolas, where the tobacco used will be shifted to supply the more popular brands and formats.

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  8. DonO says:

    I remember back in my post college days when my friends and I fancied ourselves beer connisours. Coor, which couldn’t be purchased on the east coast, was almost mytic. A friend went to Colorado and brought back a six pack. I took one sip out of the yellow can and spit it out. “This stuff is worse than Budweiser!” I exclaimed. Most of my friends agreed.

    So, yes, I agree with 2.

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