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Grain and Flour Market in Uzbekistan

22 December 201413 min reading

There are 55 large mills, 45 feed mills, 25 pasta production, 63 product cleaning plants, 44 bakeries and 34 bakery branches in Uzbekistan operated by the state with the purpose of producing flour, grains, animal feed, bread, pasta and bakery products in order to meet the domestic demand. Uzdonmahsulot, a state-owned joint stock company, had an annual flour production of 1.4 million tonnes in total in 2011.  The volume of wheat production was 6.78 million tonnes in 2013 and nearly 55 percent of it was in millable quality.  In addition, many privately-owned small mills started to have an active role in the market.  There are 60 privately-owned mills with an annual wheat milling capacity of 1.5 million tonnes only around Tashkent.

ozbekistan Uzbekistan initiated efforts for transition into a market based economy since 1991 when it became independent and there have been important changes in the course of the years. However trade authorities pursuing very restrictive and interventionist policies continue to create negative impacts on the economy of Uzbekistan. Agriculture playing a key role in the economy of country is expected to maintain this role in the future, too. Frequent changes are made for cotton that forms an important branch of the exports and efforts are made to establish rotation in the production of cotton and other products. Wheat having an important share in domestic consumption may be considered as main reason for the efforts of developing production technologies in Uzbekistan. Target of Uzbekistan is to reduce its dependence to Kazakhstan that holds the top rank in wheat and wheat flour imports and come to a position meeting the entire domestic demand. For this purpose, improvements are made in key areas such as production capacity and product quality. ECONOMIC OUTLOOK IN UZBEKISTAN Uzbekistan showing an annual growth of 7 percent on average with its population of 29.800 million and important export products such as gold, cotton and natural gas separated from the Soviet Union and became independent on 1st of September 1991. Economic relations have been established with developed countries following its independence. However economic policies with intense state control were maintained throughout the process. Uzbekistan with remarkably rich underground resources is the only country that achieved a real growth in industrial production in 1990--1996 among other former Soviet Union countries. In 1996, it reduced the share of imports and adopted policies aiming to increase the share of domestic production and control the foreign currency and imports. IMF criticized this approach of Uzbekistan and suspended its stand-by loan of 180 million dollars. Moreover, figures show that inflation rate in Uzbekistan declined dramatically since 1994 and it would not be wrong to say that the reason is strict financial and monetary policies of the country. Some changes were made in 1996 in corporate markets of the country with the purpose of expanding the national economy. Small and medium-size enterprises that developed in time had an impact on privatization of large-scale countries. Uzbekistan was enacted “Foreign Investments Law" in 1998 for attracting increased number of investments. In addition, foreign investors were granted various tax privileges and customs duty exemption. It is worth mentioning that this law has been amended in 2005. As a result of practices implemented throughout this process, some state-owned enterprises were privatized, influence of the state on prices was reduced and public expenditures were reviewed. All of the aforementioned efforts paved the way to establishing connections with some international organizations and receiving financial support. At present, overall economic profile of the country demonstrates an approximate annual growth of 6.50 percent. GDP per capita is 5.515 USD and total GDP is 56.796 billion dollars. As in the case of many other countries, Uzbekistan was also affected by the economic crisis in 2009. 2009 crisis is one of the major impacts suffered by Uzbekistan economy in the recent times. However, the impact of crisis was felt slighter when compared with other countries. The primary cause of this situation is the self-contained economic approach and centralized structure in Uzbekistan. THE PLACE AND IMPORTANCE OF AGRICULTURE IN UZBEKISTAN Figures for the year 2005 show that 40 percent of the total labour force works in agriculture in Uzbekistan`s economy substantially based on agriculture. The sector shared 28 percent of the total gross domestic product. Only 11 percent of the lands is suitable for agriculture and cultivation. Majority of the cultivated areas is irrigated by the effective state-owned irrigation system. Uzbekistan restructured Soviet type collective farms upon gaining its independence. In time, such efforts contributed to the growth of private sector`s share in agricultural production. Increase rate for the share of private sector was 99 percent in 2001. When we consider agricultural products, we see that particularly two products are very important for Uzbekistan; wheat for domestic use and cotton for exports. Contribution of cotton to the country`s economy cannot be underestimated; 40 percent of the total gross figure in agricultural production is owed to cotton. Insomuch that one of the efforts initiated by Uzbekistan government in order to eliminate the disproportion encountered in agricultural production is the attempt to reduce the dominance of cotton production. Therefore, number of cotton plantations have been reduced and the total area has been limited with 1.5 million hectare. As a consequence, distribution of agricultural products to cultivated areas has been reorganized. Despite all, cotton production is still the primary agricultural activity. Harvested volume of cotton is higher than the expected in each year. As mentioned above, in addition to cotton, wheat is also very important for the country`s economy. There are intense efforts for converting arid areas into agricultural areas through wheat and barley cultivation. Thus the size of areas for grain cultivation is increased. However, wheat yield is poor. This situation caused efforts to be focused on the development of production equipment. Corn, another important food product, is generally cultivated in agricultural areas irrigated by irrigation system of the state. Majority of rice cultivated areas are in Haresm and Karakalpakstan that is an autonomous region. Financial losses are encountered in Karakalpakstan, rice production capital of the country since Soviet Union period, due to the increase in salinity content of the soil. In addition, there is also sorghum, millet and alfalfa production in the country. However the production volume is low for this type of grains. The yield is poor in grain production due to reasons such as the requirement for modernizations in agricultural equipment, increased salinity content of the soil, lack of rotation in cotton-wheat production in real terms, poor weed control. One of the primary goals of Uzbekistan in agricultural production is to achieve a level meeting the entire domestic demand for grain production. In the recent years, numerous efforts are made in order to improve machinery used in production with the purpose of achieving better results in grain production. Machinery producers in the country enter into agreements with countries producing modern agricultural machinery such as USA and Germany as a part of the aforementioned efforts. Another important branch in agricultural production of Uzbekistan is sericulture. Sericulture activities generating the raw material for natural silk production are mainly aimed at meeting the natural silk demand in the country. Uzbekistan with fertile orchards for fruit and vegetable production meets the domestic demand and exports some of the production. Main products cultivated in the country are apple, pear, cherry, quince and apricot. PRODUCTION AND CONSUMPTION OF GRAINS AND LEGUMES Grain production in Uzbekistan is not at sufficient levels to meet the domestic demand. As mentioned above, there are efforts for meeting the demand for grains, particularly wheat. Data from the United States Department of Agriculture Foreign Affairs Service (USDA FAS), especially wheat production increases. We see that there has been an increase of 1.7 million tonnes between the season 2003/04 and 2014/15. Wheat production that was 6.3 million tonnes in 2011/12 increased to 6.7 million tonnes in season 2012/23. The production that reached to 6.8 million tonnes in season 2013/14 is anticipated to increase to 7.1 million tonnes in season 2014/15. An upwards trend is observed in wheat consumption graph based on years. Wheat consumption that was 5.1 million tonnes in season 2003 increased to million tonnes in season 2006/07 and 6.7 million tonnes in season 2011/12. The consumption volume that is 8.4 million tonnes for season 2013/14 is expected to be around 8.7 million tonnes in season 2014/15. In consideration of production figures, wheat is followed by barley in terms of production volume. However, barley production is very limited when compared with wheat production. Barley production of Uzbekistan that was 150 thousand tonnes in season 2003/04 reached to 220 thousand tonnes in season 2004/05. It would not be wrong to say that barley production has been fixated around 240 thousand tonnes between season 2003/04 and season 2013/14. Although production and consumption figures are close, produced barley does not meet the domestic demand and small volume of barley is imported. The outlook is similar to barley in connection with the production and consumption of other grains. Annual production of Uzbekistan for rice and corn is 130 thousand tonnes and 150 thousand tonnes, respectively. FOREIGN TRADE IN UZBEKISTAN Figures for Uzbekistan`s exports for the period between 2009 and 2013 show that figures do not vary substantially based on years. However, foreign trade data show that imports volume that was 8.095 billion dollars in 2009 increased to 9.763 in 2011 and 12.328 million dollars in 2013. In addition, the country that had foreign trade deficit of 2.711 million dollars in 2009 had a foreign trade deficit of 2.857 million dollars in 2011 and 6.447 dollars in 2013. The most important export products of the country are petroleum gasses and other hydrocarbon gasses. The volume of exports was 1.149 million dollars for this product group in 2013. This product group is followed by motor cars, station wagons and race cars and exports volume for this group is 648 million dollars. Cotton (unbleached and uncarded) that has an important place in the country`s economy as a major export product ranks third in the list of export commodities with volume of 609 million dollars in 2013. China is the first country when we consider trade relationships of Uzbekistan with other countries. The value of exports made from this country was around 1.301 thousand dollars in 2010. This figure declined to 1.091 thousand dollars in 2012. Exports from Turkey was 940 thousand dollars in 2011; this figure increased to 940 thousand tons in 2011 and declined to 813 thousand tonnes in 2012. Import figures show that accessories and parts for motor vehicles are the highest with 873 million dollars (2013). These products are mainly followed by petroleum oils, ship and aircraft food packets, iron, steel and car parts. Russia ranks the first in imports of Uzbekistan. The value of imports made from Russia in 2012 is 2.233 thousand dollars. An increase of 250 thousand dollars has been encountered when compared with the previous year. The value of imports from China is 1.782 thousand dollars in 2012. There has been an increase of 423 thousand dollars in the volume of imports from China when compared with the previous year. THE IMPORTANCE OF GRAINS AND FLOUR IN FOREIGN TRADE Uzbekistan makes effort for meeting the need for grains. Certain steps were taken towards meeting the domestic demand as a result of such efforts, however small amounts are still imported from other countries. Wheat holds the first place in the country with respect to import and export volumes. Data from USDA shows Uzbekistan imports more than 1.5 million tonnes of wheat annually since 2009. 2.698 million tonnes of wheat was imported and 650 thousand tonnes of wheat was exported in 2011. The volume of wheat imports declined in 2012 and imported volume was reduced to 1.863 million tonnes. Similarly the volume of exports declined to 350 thousand tonnes. Data from the year 2013 show that the volume of imports increased to 2.224 million tonnes and exports continued to decline and dropped to 300 thousand tonnes. The volume of imports anticipated for the season 2014/15 is around 1.8 million tonnes. Export figures are expected to follow a steady trend around 300 thousand tonnes. The volume of wheat flour imports is 325 million dollars in 2011. This figure increased to 291 million dollars in 2012 and declined to 271 million dollars in 2013. Import and export movements almost do not exist for other grains. Rice, corn and barley are not exported. The volume of imports is very low for these products. Products such as rice, corn and barley barely meet the domestic demand, the demand is met through supporting with small volume of imports. FLOUR MILLING IN UZBEKISTAN Flour milling in Uzbekistan is different than milling activities carried out in other countries in Middle Asia. Except for mills and small bakery shops in rural areas, substantial part of the mills and bakeries are state-owned enterprises. Produced wheat is collected by the state and it is separated based on gluten content before storing in large silos. Stored wheat is distributed to mills in large quantities. It is also certified based on the quality. Certification process is carried out based on properties such as test weight, gluten content, etc. The volumes of flour to be milled by flour mills are also determined by the state. These volumes vary based on the region and it is around 78 percent to 82 percent levels. "Uzdonmahsulot", a state-owned joint stock company, is responsible for the purchase, grading and storage of the grains and seeds based on the needs of the state. In addition, companies of Uzdonmahsulot produce wheat flour, cattle feed, bakery products, pasta and food with sugar. Based on the data from the year 2011, the company announced that there are 44 bakeries and 345 bakery branches, 55 large mills, 45 animal feed, 40 baking, 25 pasta, 63 product cleaning plants producing flour, grains, animal feed, bread, pasta and bakery products, and 5 grinding stone production plants operated with the purpose of meeting the domestic demand. Most of the product cleaning plants have been modernized with the technological equipment imported from Europe and efforts were made to increase the product quality. Uzdonmahsulot Company produced 1.4 million tonnes flour, 39 thousand tonnes breaks, 22 thousand tonnes pasta and 500 thousand tonnes semolina in total in 2011. Wheat production increased by 30 thousand tonnes and reached to 6.78 million tonnes in 2013 and approximately 55 percent of this volume was in millable quality. In addition to "Uzdonmahsulot", many privately-owned small mills started to have an active role in Uzbek market. There are 60 privately-owned mills with an annual wheat milling capacity of 1.5 million tonnes only around Tashkent. Majority of these mills use the wheat imported from Kazakhstan. Uzbek mills claim that they have the capacity to meet the total domestic demand of Uzbekistan for high quality wheat flour and they will not need wheat from Kazakhstan in near future. Private mill entrepreneurs established Private Mill Entrepreneurs Association in the recent past. Their goal is to create a lobby for demands and needs of Uzbek millers in domestic and foreign markets. Uzbekistan makes effort to reduce the volume of wheat flour imported from Kazakhstan and focuses on activities for milling its own wheat flour.
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