Report Highlights:

Post forecasts the marketing year (MY) 2013-2014 cotton lint production at 4.5 million bales. The exports forecast have been increased to 3.05 million bales. The Government of Uzbekistan continues to encourage investments in higher value cotton products with the aim of achieving a gradual increase of cotton consumption in domestic textile industry.

PRODUCTION

Uzbekistan’s marketing year (MY) 2013/2014 mass cotton harvest was finished at the end of October, although in some regions they were still harvesting cotton in the first week of November - as relatively late in the Fall as weather allowed. As of October 22, according to official estimates, farmers harvested 3.35 million metric tons (MMT) of seed cotton. However, the final official production numbers for seed cotton are not yet available, and some observers and independent experts believe that official production figures, as is customary, are still overestimated. It has always been extremely difficult to verify the reliability of official production numbers.

The area planted decreased from previous years due to switching some cotton land area to grain and other crops. However higher yields resulted in a slight increase in production are mainly attributed to utilization of more early mature and high yield cotton varieties. There was also little loss from this years’ harvest which was partly achieved by incredibly high mobilization of additional labor resources both from state and private sector in cities and rural areas during mass cotton campaign.

Problems with irrigation water supplies, especially in some southern regions, threatened growers during the vegetation period this summer. Moreover, there was about 10-15 percent replanting of cotton fields due to mid spring rains right after sowing, which also had a partial negative impact on the present crop - but just in few regions.

Post preliminarily forecasts MY 13/14 lint production at 4.5 million bales.

Production Policy

The Government’s overall cotton policy is still aimed at maintaining stable production and improving quality and fiber characteristics. This was once again confirmed in the speeches of Government officials during the recent 9th International Uzbek Cotton and Textile Fair.

In his opening remarks during the Fair, the Uzbek Prime Minister declared that by 2016 Uzbekistan would increase machine cotton harvesting to 80-90 percent. Nowadays, only 2-3 percent of cotton is harvested by machines, whereas during Soviet times it comprised almost 50 percent. This year, according to officials, Tashkent Tractor Producing Plant produced 1000 cotton harvesters and they plan to increase production to 3000 in 2015. However, due to many objective and subjective reasons, most independent experts are skeptical that this plan would be realized by 2016 and that Uzbekistan is unlikely to switch to 90 percent machine cotton harvesting very soon.

At the same time, each year Uzbekistan is increasing the area sown with faster-maturing varieties. During the last 5-6 years, the government initiated a major program to reform the cotton sector, aimed mainly at improving fiber quality.

During this cotton season, out of all planted cotton seeds utilized for sowing, reportedly 10 percent were newly developed breeds, 40 percent were mid-season varieties and 50 percent were early ripening breeds. 

Domestic prices

As usual, at the end of August the Uzbek Ministry of Finance set up official procurement prices for seed cotton.

CONSUMPTION

At the recent 9th International Uzbek Cotton and Textile Fair, government officials once again confirmed, as in the past 2 years, that domestic cotton consumption would further increase in the coming years, by as much as 50%. However, Post still believes that it is not going to happen quickly. Rather, it will depend on further successful development and operation of the local textile industry. Post forecasts MY13/14 domestic consumption at 1.5 million bales.

The spinning and weaving industries continue to invest heavily in new equipment as well as to renovate existing equipment due to improving profitability over the past several years. Domestic demand is growing with a marginal increase over the last 4 years, so also is export demand, especially for cotton yarn and textile garments. The main player in this industry is still “Uzbekengilsanoat,” a State Joint Stock Company which unites 266 textile, sewing, and knitting enterprises, most of which are joint ventures.

Reportedly, the total annual capacity of these companies is 390,000 tons of cotton yarn, 300 million square meters of cotton fabric, 89,000 tons of knitted fabric, 175 million pieces of garments and 82 million pairs of hosiery products. Within the recently approved Government decree, within 2013-2016 “Uzbekengilsanoat” SJS Company plans to implement over 1,000 projects in the textile industry and implement investment projects in the amount of 2 billion USD, including the creation of vertically integrated textile complexes with finished outputs.

At the same time, the GOU just recently decided to prolong until January 1, 2016, its decree which frees local textile factories from paying import duties while importing dye solutions, chemicals, garment accessories and some additional materials not produced domestically.

TRADE

Post forecasts MY13/14 lint exports at 3.05 million bales. After the recent 9th International Uzbek Cotton and Textile Fair, the officials of the Ministry of Foreign Economic Relations, Investments and Trade (MFERIT) announced the signing of contracts for 680,000 tons of cotton lint exports during the Fair. Most of these, however, are not finalized sales, but rather memoranda of intent. In addition, according to official reports, during the Fair the Uzbek Textile Industry concluded contracts for exporting textile products for amount of 1 Billion U.S. dollars. The Fair once again showed that Uzbekistan currently remains as the primary supplier of cotton to Asia, with Bangladesh, China, South Korea as the major markets. Specifically, according to official sources, Uzbekistan exported 320,000 tons of cotton to China in 2013, and in 2014 (depending on the market situation) Chinese importers hope to increase imports of Uzbek cotton to 400,000 tons.

Currently a well-established local system of logistics, consisting of 21 specialized cotton terminals with a storage capacity of 410,000 tons, and a good transportation infrastructure and shipment corridors, facilitate timely deliveries of Uzbek cotton to buyers