According to official data, over the last 5 years there has been a general decline in the gross output of cotton in Kazakhstan (Fig.1). For the period 2013-2014 cotton production has declined from 106 thousand tonnes to 62.9 thousand tonnes (-40%). In relation to the 2013, the decline in 2016 has reached 50%. As of November 2017, gross output of cotton amounted to 45.4 thousand tonnes.
Figure 1. Key indicators of cotton production in Kazakhstan
Source: Committee on Statistics of RK
A similar downward trend have been observed for cultivated area – fall from 160.6 thousand ha in 2011 to 99.3 thousand ha in 2015. Despite the increase of cropped areas by 2015, in 2016 there was a decrease in cotton production volume. A reduction in the yield of cotton was due to such factors as increased pests, water shortage and severe salinization of the soil.
And, if the downward trend of cotton production can be traced back to 2013 the trend of net area sown in the review period (Fig.1) has been observed since 2011.
For the period 2011-2015 cropped area accounted for 61.3 thousand ha or 38.2% and the gross output of cotton decreased by 62,1 thousand tonnes or -18.5% with an average annual crop yield of 25.9 hundredweight per hectare. In 2016 the cropped area increased to 109.6 thousand ha (+10%) compared to the 99.3 thousand ha planted in 2015. As of November 2017, cropped area has increased by 23% to 134.6 thousand ha.
It should be noted that general reduction of net cropped area in Kazakhstan was also observed in early ages, in the beginning of 90-s. Since 1991, the net cropped area of cotton decreased by 13 thousand ha (-11%), the total gross production of cotton decreased by 129.4 thousand tons (-44%), crop yield decreased by 10.9 centners per ha (-44%).
Figure 2. Cotton market price (2012-2017), USD
During 2010-2016 cotton gross output in Kazakhstan was showing variable values (Fig.1). On the background of decline in the net sown area at the end of 2015 the increase in market prices (Fig.2) enhanced the profitability sales revenue of cotton in the same year (Fig.1). It allowed to cover the risk of shortfall in profits from the cotton sales at a relatively low crop yields. In 2014 the sharp fall of market prices was affected mainly by China, the world’s largest importer of cotton. It began selling cotton from its national reserve and unexpectedly declined cotton imports. The oversupply of the commodity in the market in the same year triggered a sharp decline of cotton market prices.
According to the International trade centre (ITC), in 2016 the Top-10 cotton exporters were recognized China (28.5%), India (11.9 %), USA (10.8 %), Pakistan (6.6 %), Viet nam (4.1 %), Hong Kong (3,6%) Turkey (3,3%), Italy (2.7 %), Brazil (2.6 %), Australia (2.3 %). Uzbekistan ranked 14th place (1.4 %) and Kazakhstan -39th place (0.2%).
Table 1. Imports and exports of cotton in Kazakhstan (2012-2016).
|tonnes||thsd. USD||tonnes||thsd. USD||tonnes||thsd. USD||tonnes||thsd. USD||tonnes||thsd. USD|
|Imports||5 188.0||8 630.6||6.1||21.3||743.3||1 175.9||3 257.6||4 817.9||5.2||56.3|
|CIS||5 188.0||8 630.6||3,8||15.3||742.9||1 175.4||3 240.5||4 795.8||5.2||56.3|
|Tajikistan||5 187.8||8 625.7||682.4||1 006.6||2 458.8||3 707.5|
|Rest of the world||2.3||5.9||0.5||0.5||17.2||22.1|
|Exports||53 739.9||86 994.0||81 770.8||137 078.2||47 891.7||80 140.5||39 863.3||53 541.9||56 083.9||78 474.0|
|CIS||33 381.5||53 532.1||43 338.4||72 729.7||28 465.4||48 959.3||23 926.7||32 388.3||26 728.7||36 311.4|
|Belarus||658,4||1 079.0||3 590.0||5 982.9||1 975.6||3 470.2||811.7||1 140.1||1 751.0||2 477.8|
|Moldova||6 763.7||11 299.2||6 896.5||12 090.2||8 175.0||13 895.0||11 739.6||16 436.9||8 193.3||11 098.6|
|Russia||23 548.5||36 598.6||32 851.8||54 656.6||18 314.8||31 594.2||11 375.5||14 811.2||16 784.3||22 734.9|
|Ukraine||2 410.9||4 555.4|
Source: Committee on Statistics of RK
The analysis of cotton imports and exports (Fig.1) shows that due to insufficient level of development of the light industry in the country, over 70% of produced commodity in Kazakhstan is generally focused on foreign markets. In this regard, there is undersupply of cotton in the domestic market and a low level of import substitution. It is worth noting that among other factors the market price of cotton is also sensitive to the demand change of the largest clothes manufacturers on synthetic fibers and yarns, which are essentially cheaper than cotton at cost.
In general, the process of transition of independent Kazakhstan to market economy was accompanied with negative consequences in many sectors of the economy. In particular, in agriculture took place the process of crushing large land users, collective farms and state farms into small farms, the lack of adequate funding, the stagnation of state institutions that support agriculture, water systems and seed breeding. In addition, the issue of the need for effective partnerships and finding new markets had arisen.
According to the Kazakh Research Institute of Cotton Growing, in early ages cotton was cultivated in Zhambyl, Kyzylorda and South regions of Kazakhstan. Due to the low yield of cropped areas in Zhambyl and Kyzylorda regions, currently only the South region cultivate cotton.
Cotton production is labor-intensive and costly process. Up to 70% of production costs are costs that directly affect the yield (seeds, fuel, fertilizers, plant protection products and depreciation of fixed assets). In addition, according to the Law of RK “On compulsory insurance in plant growing” the producers are obliged to insure the loss of potential yield of cereals, oilseeds, sugar beet and cotton.
In crop production, according to the State Program for the Development of the Agroindustrial Complex of Kazakhstan for 2017-2021, the government subsidizes the cost of fertilizer, herbicides, bioagents (entomophages) and biological products, seeds, costs for examination of the quality of raw cotton and cotton fiber. Thus, the government plans to increase total cotton production up to 300 thousand tonnes by 2021.
The absence of significant measures to promote water conservation at current levels and tariffs in agriculture are the reasons for the low efficiency of water use. Currently, costs for makeup water are less than 1 % of the cost of major crops (0.1% for cotton) that is substantially less than in other countries (2-10% for cotton in countries such as India, China, Australia, South Africa, USA and Israel). It is worth noting that today, the question of adequate water supply for the cultivation of cotton remains acute since cotton absorbs up to 27 times its own weight in water.
However, the government noted the presence of problems in the state support. Some of them are:
- The poor availability of loans and subsidies for most farmers.
- State interest rate subsidies to agro-industrial complex (AIC) and farmers, for leasing of agricultural machinery and animals, for farm equipment do not stimulate tier-II banks and leasing companies to reduce its interest rates on agricultural lending and leasing.
- Due to the high risk associated with agricultural lending the insurance companies and guarantors are less likely to insure agribusiness and provide guarantee to agricultural loans.
- The lack of targeted long-term loans for the financing of agriculture from the government of Kazakhstan and international financial organizations.
- High climatic, epidemic, phytosanitary, quarantine, economic risks of the agricultural industry.
- Legislation does not provide insurance companies the right to demand from a client to comply with the agro-technologies and does not provide the eligibility to waive the insurance in case if the client does not meet insurance requirements.
- According to the legislation and cost standards established in 2004 and 2009 the losses of farmers are not covered in full by insurance policy.
- Inadequate guarantee tools, which secures obligations of AIC.
It should be noted that in accordance with “The Sustainable Cotton Communiqué” and BCI initiatives up to 36 of world’s most renowned clothing and textile companies (ASOS, IKEA, Adidas, H&M, Burberry etc.) committed to using 100% sustainable cotton by 2025. It means that there is a demand for more sustainable cotton and subsequently rise.
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