Global Markets: Cotton – Uzbekistan Showing Strong Consumption Growth

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The 77th annual International Cotton Advisory Committee (ICAC) Plenary Meeting in Uzbekistan gave the international cotton trade an opportunity to see the changes underway in the country’s cotton and textile sector.

Since its independence in 1991, it has been difficult to account for the final destination of Uzbekistan’s cotton exports, as a large share flow to countries with incomplete, inconsistent, or long delayed trade data (for example, at least 200,000 metric tons per year are believed historically to have been exported to Bangladesh).

As such, it has been difficult to determine the exact quantity of these exports, given that Uzbekistan itself does not report consistent trade figures. However, information provided at the meeting indicated that exports in recent years were substantially overestimated.

Uzbekistan’s spinning industry has shown rapid growth, driven by extremely favorable tax and input price conditions for foreign investors, gradual liberalization of some economic regulations (most notably the recent liberalization of currency exchange), and the decline of key competing industries, such as Russia’s spinning sector.

Especially in the last 3 years, Uzbekistan’s promotion of a special set of investment incentives and a new “textile cluster” program have generated strong interest and verifiable investments by spinners.

The government’s official estimate of spinning capacity, which apparently includes projects underway but not yet fully operational, is about 2.6 million bales of cotton yarn in 2017. Adjusting for utilization of capacity, marketing year seasonality, and the likely inclusion of projects that have not yet been fully scaled up produces the new cotton consumption estimates included in the WASDE.

Meanwhile, the export figures shown more closely reflect the trade which can be verified in importer-country data, with adjustments for low-information countries.

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Historical Revisions

In addition to a substantial change to Uzbekistan, historical revisions were made to Argentina, Russia, Sudan, and Bangladesh. Revisions in Argentina result in a 740,000-bale reduction in global 2017/18 beginning stocks.

Argentina’s consumption numbers were substantially revised based on newly-available cotton yarn production data provided by the government of Argentina, greatly increasing consumption estimates in recent years. Argentina’s estimated stock levels had previously shown a secular increase over time, but now show no such steady rise.

Revised or newly available trade data for Russia, Sudan, and Bangladesh motivated the historic changes in those countries.

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