Uzbekistan, a former Soviet republic in central Asia, has a major agricultural sector, despite the fact that much of the country is classified as desert. It’s one of the world’s biggest cotton producers, although government efforts to increase self-sufficiency have led to considerable diversification in agriculture.
Uzbekistan’s grains production is not enough to satisfy internal demand. According to the International Grains Council’s (IGC) most recent Grains Market Report, total grain production in Uzbekistan was 6.6 million tonnes in 2009, compared with 6.5 million the year before.
The country is predicted to import 1.3 million tonnes of grains in 2009-10, compared with 1.5 million the year before. Of that total, 1.2 million tonnes will be wheat (1.5 million the year before).
Uzbekistan’s economy, especially its exports, has been focused on cotton, gold and energy, according to a report on the reform of Uzbekistan’s agriculture, published at the end of last year by the Asian Development Bank (ADB), which put the share of those three products at 70% of total exports.
Uzbekistan gained its independence in 1991, and between 1990 and 1998 it went through a process of restructuring 1,424 collective and state farmers into farms outside the state sector.
"During the first stage of reforms these farms were converted into various forms of cooperatives, mostly "shirkats" in which all employees had a shareholding or were divided into various types of indi id l farm with the state retaining ownership of the land," the ADB report explains. "Shirkats essentially became a collection of production units (pudrats) operated by a group of families under the overall management of the head of the shirkat.
"The hope was that these units would have the incentive to improve productivity, but the cooperative structure did not provide the individual working units with any added incentives other than to use the assets of the shirkat for their own benefit. Consequently, shirkats had a variable performance record. A small minority performed well but the vast majority were either only marginally profitable or have incurred substantial financial losses, which have been written off periodically."
Thus, from 2001 onward the government began the process of transforming shirkats into private farms, with a new legal framework put in place in 2003. The plan involved transforming shirkats into leasehold farms with the new leasehold farmers chosen on the basis of a points system. By the end of 2007, all the shirkats had been restructured.
According to the ADB, most of the new farms are between 35 and 50 hectares in size. There are now 220,000 of them cultivating around 3.2 million hectares of irrigated land.
"The land use rights of these leasehold farms appear to give a reasonable level of security to encourage private investment, but account needs to be taken of the terms and conditions under which the leasehold can be rescinded," the report said. "The leasehold right is linked to the fulfillment of state procurement quotas for cotton and wheat. This gives local administrations considerable influence over the tenancy if the farm does not perform as required."
In effect, government has used the leasehold right as a means of selecting farmers who are able to achieve a required standard of performance, the bank said. "The maximum lease period is 50 years, with the state retaining ownership of the land."
Some of the families which lost out in the process of allocating leasehold land have been given small plots, but their total irrigated area cannot exceed 0.35 hectares. There are now 4.4 million of these "dekhan" farms, which occupy about 501,000 hectares of agricultural land.
The leasehold farms have to meet government quotas for cotton and wheat output and are given a credit facility and a structure of suppliers, while the dekhan farms can grow what they like, but they don’t get access to the suppliers. The ADB does express some concern over the nature of land holdings. "Land tenure status in the agriculture sector is weak and is not consistent with the need to promote private investment in farming," it said. "Legislation is needed to give landholders, especially leaseholders, greater security of tenure, including inheritance rights."
The grains processing sector in Uzbekistan is dominated by the joint stock company Uzdonmahsulot. It runs the storage sector and the flour mills as well as the animal feed and bakery industries, employing around 30,000 people.
It includes, according to its website, 44 storage and shipping organizations. There are 47 seed-cleaning shops which process over 300,000 tonnes of seed a year.
It has 48 flour mills, with flour milling taking up 70% of its production value. "Beginning from 2003, flour and groats industries are functioning using solely local raw materials," Uzdonmahsulot said on its website. Feed production makes up to 11% of the production structure of Uzdonmahsulot, represented by 41 feed plants.
According to Uzdonmahsulot, the bread and bakery industries make up to 15% of the production volume of the grain industry. The bread, macaroni and pastry industries are represented by 17 enterprises, located in different regions of the Republic, and the "Tashkent non" association with its branches which include 50 enterprises of large, medium and small capacity."
The organizations which make up Uzdonmahsulot include a mix of joint enterprises with a small number of private companies.
Uzbekistan has become a major importer of wheat flour in recent years. According to the IGC, in 2009-10 it will be second only to Afghanistan in the world, and it will be the biggest importer of the CIS countries, bringing in 1.2 million tonnes from outside the country, slightly down on the previous year’s 1.225 million.
Uzbekistan’s imports have helped neighboring Kazakhstan become the world’s biggest flour exporter.
Uzbekistan does have an oilseeds industry that is dominated overwhelmingly by cottonseed, the country’s key crop. "Despite government encouragement, planting of canola and sunflower is limited," a USDA report on the sector, published in April last year, said.
At the time, the preliminary forecast for Uzbekistan’s oilseeds crop was 2.08 million tonnes, nearly all of it cottonseed. "Although domestic supplies are limited and demand for protein meal is growing, no significant oilseed or oil meal imports have taken place in several years," the report said, forecasting total vegetable oil imports, mostly sunflower oil, at 70,000 tonnes in 2009-10.
"Despite its importance, efforts to increase cottonseed production have not been very successful in the past," the report said. "Environmental issues along with Uzbekistan’s desire to diversify to other crops have limited its expansion."
The report explained that the Uzbek government provides subsidized fertilizers and seed as well as nearly free irrigation to support cotton producers. It maintains state orders controlling 50% of the crop. "In reality, however, it still procures virtually the entire crop," it said.
According to the USDA attaché report, Uzbekistan’s seed crushing capacity is well below the 3.5 million tonnes reported during the Soviet era. "Due to the lack of spare parts and inadequate maintenance, processing capacity has declined to about 2.4 million tonnes," the report said. "Experts estimate the industry currently operates at less than 50% capacity due to the lack of oilseeds available for crushing."
The cottonseed crushing industry is run by a joint stock association called "Oil Crushing and Food Industry," which consists of the former state crushing, extraction and refining facilities. The attaché report puts the number of big crushing plants at 20, half of which have been privatized in the past four years. "Foreign investments have increased, although slowly, and most plants are now in the form of joint ventures and joint-stock companies," it said. The decline in cotton production has created an annual oilseed requirement of more than 250,000 tonnes. Uzbekistan uses imported oilseeds to try to take up some of the capacity in its crushing industry and, in the process, to try to save on foreign exchange by adding value domestically, instead of importing oil and meal.
Chris Lyddon is World Grain’s European editor. He may be contacted at: