Market Research for Horticulture Products grown in Uzbekistan 2024

MARKET RESEARCH FOR HORTICULTURE PRODUCTS GROWN IN UZBEKISTAN

2024

DISCLAIMER

The author takes full responsibility for the contents of this report. The opinions expressed do not necessarily reflect the view of JICA or ISCAD.

FOR ANY FURTHER INFORMATION RELATED TO THIS PROJECT PLEASE CONTACT:

Sigitas Bubnys (sigitas.bubnys@gopa-afc.de), Project Manager GOPA AFC

Johannes Buschmeier (johannes.buschmeier@gopa-afc.de), Project Director GOPA AFC Sebas�an Faryniarz (sebas�an.faryniarz@gopa-afc.de), Team Leader GOPA AFC Christoph Arndt (christoph.arndt@gopa-afc.de), Hor�culture Consultant (Author)

GOPA AFC-PN.: 30900 2978

Bonn, 30 April 2024

1. INTRODUCTION

In February 2017, the Government of Uzbekistan adopted a new National Development Strategy promoting economic development and market liberalisation. A number of reforms were launched in 2017/2018, inter alia, the introduction of a system of free currency conversion, the implementation of free economic zones, a reform of tax laws, the improvement of the investment climate via decreased tax rates for foreign investors, the promotion of an open and free economic policy with neighbour countries, the re-start of negotiations with WTO and the EU on a free trade agreement, as well as the abolishment of the State monopoly on fruit and vegetable exports and the reduction of respective customs duties.

As a result of these decisions, trade agreements were negotiated and concluded with a number of countries in the region, out of which those with China, Russia, Turkey and Korea are among the most important ones In 2021, Uzbekistan joined the GSP+ system of preferences of the EU permitting 6,200 goods to be exported duty-free to EU countries

All these initiatives had a positive impact on horticultural production and trade. Policy analyses showed that the resulting boost in horticulture was mainly brought about by the free convertibility of the currency which triggered a sharp increase in prices of imported goods and improved the international competitiveness of Uzbek products. Another important policy measure have been the increasing land allocations to farmers for fruit and vegetable production.

Growth was underpinned by the new development strategy of the Government of Uzbekistan for 2022-2026, focusing on seven priority areas and 100 development goals for Uzbekistan. Reforms in these priority areas have had a direct impact on horticulture: Fruits and vegetables can now be freely exported at a price regulated by supply and demand.

For the agriculture sector, a Development Strategy 2020-2030 was approved in 2019. The strategy aims at the diversification of production, the improvement of land and water usage, the establishment of a favourable business climate and the development of “highly valuable product chains” The strategy builds on different pillars such as ensuring food security of the population, creating a favourable agribusiness climate and value chains, reducing the role of the state in managing the sector, and increasing investment attractiveness The term “Highly valuable product chains” refers mostly to horticulture, and in order to promote horticulture, the strategy emphasizes the need for storage and processing as well as competitive value chains.

The development of Uzbek exports through the promotion of fruits and vegetables has become an important element of the national agricultural policy. Due to inconsistent quality and supply, export has been still limited in the beginning of reform process. The fruit and vegetable sector is mainly managed by small and medium sized farms, confronted with challenges in relation to uniformity of production, volumes, quality, production standards and marketing management according to international norms. However, the cluster approach in agriculture and the establishment of Agro-Logistic Centres have proved to help to overcome these challenges. In the cluster approach, a central farm supports other, less experienced and endowed farms with technology and market. In return, the State grants access to land for these cluster farms.

Another measure to specifically foster export is the reimbursement of 50% of transportation costs for horticultural products that are exported by rail, road and air.

With all these reforms, the local production of horticulture products in Uzbekistan boosted. This report first studies production trends in horticulture and then looks at existing and potential markets for this production.

This market research has been produced in the frame of the Horticultural Value Chain Development Project of ISCAD which is supporting the 400 m USD credit line of JICA for horticultural private sector investments in Uzbekistan (two project phases of 200 m USD each) The report wants to provide information to policy makers, ISCAD and the Uzbek private sector about priorities of investment that need to be financed in order to support the development of internationally competitive fruits and vegetables chains in Uzbekistan. Such investments centre on production (irrigation systems, support structures, modern rootstock and varieties, machinery for orchards) and post-harvest operations (cold stores and packing stations)

2. HORTICULTURAL PRODUCTION IN UZBEKISTAN

The volume of horticultural production in 2022 amounted to 4.8 million tons of fruits (of which 1.8 million tons of grapes) and 17.0 million tons of vegetables (of which 3.4 million tons of potatoes and 2.4 million tons of melons and gourds). The strong horticultural output is a result of the agricultural reforms 2020-2021 described above encouraging farmers to grow, export, and invest into fruits and vegetables instead of continuing with the cultivation of cotton and wheat. Tables 1 and 2 show the importance of the different horticultural crops in terms of area coverage.

Table 1: Area used to cultivate fruits (hectares), 2022

Source: FAO and Agency of Statistics, Uzbekistan

Table 2: Area used to cultivate vegetables (hectares), 2022

Source: FAO and Agency of Statistics, Uzbekistan

Although three times the volume of vegetables is produced and traded compared to fruits, the area allocation to vegetables and fruits is about on a par. Concerning the monetary value, more turnover is made from fruits which in generally are traded at a higher price than most vegetables.

With regards to fruits, Uzbekistan is mostly known for its stone fruits and table grapes. For these crops, Uzbekistan has a very suitable climate and is therefore highly competitive. However, the data indicate that volume wise, more apples enter the market (more than 1 million tons every year) – although Uzbekistan has hardly any comparative advantage in the production of apples. Berries and nuts are just emerging and do not yet have significance in trade.

Regarding vegetables, again, Uzbekistan has very little comparative advantage for the production of potatoes much of which are imported from neighbouring Kazakhstan and Kyrgyzstan. At the same time, most of the area for vegetables is allocated to the potato crop (more than a quarter), and 3.4 million tons of potatoes are produced every year of which much is consumed at household level, but still a majority enters the market. The second most important crop is tomatoes which recently came under pressure if produced in heated greenhouses during the winter period. Vegetables for which Uzbekistan is internationally highly competitive are carrots (orange and yellow types), onions, garlic, watermelons, musk melons (or honey melons), early cabbages as well as fruit vegetables if grown in the open field or in non-heated greenhouses.

Businesses in horticultural trade are often interested in the position a certain product has in the country’s horticultural industry. Mainstream products usually offer larger production volumes at lower prices, but come with much competition among traders and little innovation in production. Emerging products have the advantage that the interest of growers and traders is higher to build up longer-term partnerships and introduce innovations even though production volumes are still limited. Niche products require a lot of investment from both sides, growers and traders, who will both still be in the learning process. Both have the chance to build up partnerships with little risk of competition; however, trading volumes are small and transaction costs high.

At present, the following horticultural products in Uzbekistan qualify as mainstream products: Apricots, table grapes, tomatoes, onions, garlic, early cabbages, musk melons, watermelons, Meyer-lemons and nuts.

Emerging horticultural products are sweet cherries, peaches, nectarines, plums, apples and pears, but only if modern varieties are cultivated. Also, the production of pomegranates is on the rise. Potato production is currently also transforming with more modern varieties and production technologies producing a crop that is better suited to satisfy consumer demand. Such potatoes can therefore also be classified as emerging Niche products are berries (strawberries, raspberries, blackcurrant and blueberries of modern varieties), tropical fruits grown in greenhouses, non-traditional cabbages and other vegetables, medicinal and aromatic plants as well as certified organic fruits and vegetables

2.1. Fruit, nut and berry production

2.1.1 Seed fruits

Although a traditional crop, apple production is increasing. This growth stems from new, intensive orchards that have been planted with new European varieties Although experience with such type of production is still young, the first crop will enter the market very soon and will most probably considerably reduce apple imports (Table 3).

Source: FAO and Agency of Statistics, Uzbekistan

Table 3: Development of area used for seed fruits (thousand hectares)

2.1.2

Stone fruits

While the apricot area is not growing, there has been a constant increase since 2017 in the area under sweet cherries. These are often new orchards with modern European varieties that are grown mainly for export into the early fresh fruit market. Uzbek farms have also invested into new sour cherry orchards responding to a deficiency of this crop in the European and Asian market. 2022 also saw an increase in the production of peaches, nectarines and plums, mostly again new intensive orchards with modern European varieties (Table 4).

Source: FAO and Agency of Statistics, Uzbekistan

2.1.3

Grapes

Uzbekistan is an important producer of table grape varieties for the fresh market and for drying. Together with Chile, Peru, Italy, South Africa, China, USA, India, Australia, India, Turkey and Spain, Uzbekistan belongs to the top ten exporters of fresh table grapes in the world. With regards to dried grapes, Uzbekistan occupies 3rd position in the world (after Turkey and Iran) supplying about 10% of the internationally traded volumes (84,000 t according to OIV). N.B. Uzbekistan exports more dried grapes than it produces (70,000 t), because Uzbek traders also market the production of neighbouring countries. The table grape area has been slightly growing since 2018, and the new vineyards use modern pergola technology with irrigation. However, not much use is made of new European and American varieties. The area under wine grapes has also been growing although this segment is still neglectable in Uzbekistan (Table 5).

Table 4: Development of area used for stone fruits (thousand hectares)

Source: FAO and Agency of Statistics, Uzbekistan

2.1.4

Berries

Berries are still a niche crop, and only strawberries (about 800 ha) and raspberries (about 800 ha) have gained some importance. 500 ha of Uzbekistan’s raspberry production is concentrated in the village of Vodil in the Fergana Valley. Varieties are still unimproved and modern post-harvest facilities are hardly available. A few farmers have started to grow blueberries mostly in pots and with substrate imported from Russia, Belarus or the Baltic countries. There seems to be good perspective to grow blueberries and raspberries in underused greenhouses as they require less heat than tomatoes, but yield very good prices in autumn, winter and spring.

2.1.5 Other fruits

Among other fruits, persimmon, pomegranate and figs have to be mentioned which are grown in the open field as well as Meyer-lemons and other citrus species which are cultivated in often unheated greenhouses. Persimmon (about 3,400 ha in 2022) and fig (about 900 ha in 2022) production seems to be stagnating or in decline. Although modern varieties are internationally available, new orchards have hardly been established. Pomegranate production, however, is growing dynamically (15,500 ha in 2022). Centres of production are Quva in the Fergana Valley and Termiz in Surkhandaryo. New varieties, some seedless, have as well started to emerge. Also, Meyer-lemons from Uzbekistan are very high in demand both domestically as well as in other Central Asian countries. Their cultivation is intensive and highly profitable. 1,600 ha of “limonarias” (as the lemon greenhouses built into the soil are called) have been recorded for 2022, up from 1,400 ha in 2021.

2.1.6 Nuts

Nut production is not growing in Uzbekistan. Nut cultivation is a long-term investment, and growers in Uzbekistan have been rather going for quick returns on investment considering that land usually is not owned by the growers, but is leased from the State only for a number of years (Table 6).

Table 6: Development of area used for nut production (thousand hectares)

Source: FAO and Agency of Statistics, Uzbekistan

2.2. Vegetable production

Potatoes, melons and tomatoes are horticultural crops in Uzbekistan which enter the market in important volumes. Potatoes are an important stable crop for Uzbekistan, and therefore production has been rising over the past years although much crop is also imported from neighbouring countries. Further growth of potatoes and carrots, another staple crop, can be expected. Melons are traded mostly domestically, but are also exported. Uzbekistan has a comparative climatic advantage for the crop.

Tomatoes and cucumbers have mostly been produced in 6,000 ha of greenhouses (1.9 ha average per greenhouse operation). About half of the production was earmarked for export. High gas prices and the unreliability of gas supply, however, have shaken the greenhouse industry in 2023 leading to uncompetitive production costs from shifting to coal, underused greenhouse capacities and arrears of loan repayments. In the mid-term, unless technology is changed (better heat insulation, renewable energy use, adapted cropping patterns), tomato and cucumber greenhouse production will decrease. Currently, cheaper tomatoes from Turkmenistan’s greenhouses enter the domestic market in Uzbekistan, and the country’s export to Russia is increasingly taken over by Azerbaijan, Iran, Turkey and Turkmenistan.

Yellow onions are an important cash crop for many Uzbek horticulture farms. Every year between 200,000 and 300,000 t are exported, mainly to Russia and Kazakhstan. Overproduction as in 2023 as well as the weak Russian rouble, however, has recently led to a price erosion. Such periodic price highs and lows will determine the cultivation area and production volumes of onions (Table 7)

Table 7: Development of area used for vegetable production (thousand

Source: FAO and Agency of Statistics, Uzbekistan

2.3. Medicinal and aromatic plants

Uzbekistan produces mainly medicinal plants from more than 17,000 ha of land (mostly nonirrigated land). Major products are liquorice, capers, ferula and rosehips produced in 16 clusters With the help of tax cuts, subsidies and preferential loans, the Government wants to boost the production of these and other medicinal plants and give incentives for local processing into teas and pharmaceuticals.

3. FRESH MARKET VERSUS MARKET FOR PROCESSED PRODUCTS

The horticultural market in Uzbekistan does not differ from other markets for horticulture products worldwide: Farmers and traders make the highest gains when they produce for the fresh market – both with regards to domestic sales as well as export However, this is also the most demanding market in terms of quality requirements and perishability.

To give an example: Fresh table grapes are traded for about 840 USD/t (wholesale price) whereas dried grapes catch a price of 1000 USD/t (wholesale price) although the weight ratio of fresh to dried is about 5:1. More examples of horticultural products typically processed in Uzbekistan are shown in Table 8

Source: UN Comtrade Database for 2022

Although the prices per kg are often much lower for produce sold to the processing industry, there are advantages for the grower, too The volumes which processing facilities contract are usually much higher and therefore transaction costs lower for the farmer and consolidator. In addition, quality requirements are often lower with regards to product appearance, size, pest and disease attack as well as variety These lower requirements of the processing market make it possible for farmers to mechanise harvesting operations and use much larger containers for transport to the buyer which reduces overall production costs. Therefore, the processing market is an interesting option in cases where farm sizes are large and/or individual farmers are poorly organised, and where labour is scarce.

Table 8: Wholesale trading prices of fresh products versus processed products

In Uzbekistan, several production systems are found parallel to each other: Small production units of dekhkan farms on one hand as well as quite large orchards of 10 ha and more and greenhouses of 2 ha and more of registered farms on the other; farms employing family labour which is usually available in abundance in Uzbekistan as well as larger farms which use mechanised harvesting; poorly organised small farms as well as clusters in which the central farm provides services, know-how and market to cluster members.

The fresh market will always be the preferred market for both small and large farms. The existence of a functioning processing industry is nevertheless still important for both farm types as it provides a market in years of overproduction However, only some large and well mechanised farms will primarily and specially produce for the processing industry being able to generate sufficient economies of scale.

3.1. Fresh market

3.1.1

Market for fresh fruits, berries and nuts

The most important fruits traded on the fresh market both for domestic consumption as for export are apples (more than 1.1 million tons annually) and table grapes (about 0.9 million tons). They are followed by fresh apricots (0.3 million tons), pomegranates, sweet cherries and peaches/nectarines (about 0.2 million tons each) (data of FAO, Agency of Statistics and UN Comtrade)

With a rising income of the Uzbek population, the demand for a greater variety of fresh fruits, berries and nuts also grows It can be observed that retail markets in the regional centres increasingly offer fruits which are new to the consumer such as tropical fruits and blueberries Much of this is currently imported, but the substitution of imports would be in the interest of all market participants.

3.1.2 Market for vegetables

Among the vegetables traded on the fresh market, the staple food crops potatoes and carrots rank highest. Nearly 4 million tons of potatoes are traded annually of which more than 0.5 million tons have been imported from neighbouring countries. This means that there is an unsatisfied demand for locally grown potatoes. 3.9 million tons of carrots appear on the fresh market, virtually none is imported, but a small quantity is exported. Tomatoes are the third most important crop on the fresh market (just less than 2 million tons traded) The Number 4 crop are onions (1.2 million tons traded on the fresh market).

3.2.

Market for processed horticulture products

Companies drying, freeze-drying, freezing, juicing and canning fruits and vegetables exert a significant influence on the demand for horticultural products – though smaller than the fresh market. A compendium of important processing companies sorted by region, can be downloaded here: https://www.agro.uz/qishloq-xo-jaligi-mahsulotlarini-qayta-ishlash/

3.2.1 Dried products

Drying is the most important and also the traditional way of processing horticultural products in Uzbekistan. Mainly grapes are dried followed by apricots, apples, plums, spicy peppers, tomatoes and beans

Some important processing companies are: Baraka Meva Sanoat LLC from Namangan, Biogumus LLC from Nukus, Chelak Tomorqa Xizmati LLC from Samarkand, Cherry Pick Production LLC from Tashkent, Nateco Impex LLC from Namangan, Samarkand Agri 2018 LLC from Samarkand, Samrin Trade LLC from Samarkand, Spectrum Dry Fruits LLC from Samarkand, Spice Expert LLC from Tashkent, Sultan Agro Impeks LLC from Namangan, and Sunny Fruit Production LLC from Tashkent

While much of the drying of grapes and other fruit is sun-drying on trays or tarpaulins either at the site of production or in the factory, some companies have started capital-intensive freezedrying operations. Examples are Bonaf LLC from Tashkent, Fergana Exim Agro LLC from Fergana and Sunny Land Products LLC from Tashkent

3.2.2

Frozen products

Freezing companies mostly process vegetables (broccoli, cauliflower, peas, beans, spinach, sweetcorn), pomegranates, sweet melons and berries, but also fruits like peaches and plums

The export of frozen vegetables and fruits is one of the fastest growing subsectors in Uzbek horticulture. According to East Fruit (2023), the revenues from the exports of frozen vegetables and fruits brings Uzbekistan already approximately the same revenue as the exports of cherries or onions. GDF Export LLC from Tashkent, Ironlit LLC from Namangan, Samarkand Garden Plast LLC from Samarkand and Teodora Goods LLC from Tashkent are some of the companies freezing vegetables and fruits and exporting them.

3.2.3 Juices, canned products and jams

The demand exerted from companies making juice, canned products and jams is relatively small in Uzbekistan. Agromir is a group of large companies in Samarkand producing apple juice concentrate putting juice on the domestic market under the brand names Bliss and Meva as well as processed vegetables under the brand name Marinelle; however, the raw material is mostly from own production. Other juice factories are Marvel Juice LLC from Namangan (brand: Tip Top) and Natural Fruit Juice LLC from Namangan (brand: Jesco). Samarkand Konserva from Samarkand is one of the larger companies producing canned products

Home-processing (making compote, jams and “salads”) is still very important in Uzbekistan, and the raw material for home-processing is traded on the fresh market. A good example is sour cherries 80,000 tons are produced every year little of which is processed by large companies or exported fresh, but most of it is processed by private households for own consumption

3.2.4 Fermented and distilled products

Except for wine-making from grapes which is not considered horticultural processing, there is little distilling and fermentation of fruits. Spirits in Uzbekistan are not made from fruits but rather from grains and sugar beet.

4. DOMESTIC MARKET VERSUS EXPORT MARKET

4.1. Domestic market

With more than 35 million inhabitants in Uzbekistan, most of the country’s horticultural production is sold on the domestic market. It needs to be noted that the country’s population is still growing which sends strong signals for the development of the domestic market. The population has been steadily growing and with an increasing rate of growth even since 2012. This rate has now exceeded 2% per annum.

Other important factors for the strength of the domestic horticultural market are the per-capita growth of disposable incomes and the process of urbanisation. Data of the Statistics Agency of Uzbekistan shows that real per capita income in 2023 has been four times higher compared to ten years earlier (4.5 times even in Tashkent Region). With growing incomes, the consumption of fresh fruits, berries and nuts usually increases at the expense of stable foods. And within the group of fresh fruits, the consumption of highly perishable products (such as cherries and berries) will grow at the expense of storable fruits such as apples. For table grapes, international statistics of OIV show that Uzbekistan belongs to the Top 10 global consumers of table grapes.

In addition, it can be observed that the domestic market is calling for “exotic” fruits such as papayas, passion fruits, blueberries, physalis and different citrus species in addition of Meyerlemons – all of which can well be grown in Uzbek greenhouses.

Table 9 compares the share of the domestic and of the export market for each of the major horticultural products. The domestic market generally dominates, except for plums and persimmons which are exported in large volumes The share of the domestic market is usually higher than 80%.

Fresh plums are mainly going to Kazakhstan (60%) and Russia (36%) and dried plums mainly to China (33%) and Russia (23%). For persimmons the statistics only record the part of crop that is grown in orchards, and this is nearly entirely going into export (56% to Russia and 33% to Kazakhstan) while those fruits sold on the local fresh market are mostly coming from backyard gardens.

High export shares can also be noted with regards to table grapes, peaches/nectarines and Meyer lemons.

The same picture for vegetables: They are mostly produced for the domestic market with the exception of leek (98% to Kazakhstan) and lettuce (86% to Russia) as well as dried green peas (77% to Afghanistan). For potatoes and green beans, zero export has been recorded –they are completely produced for the domestic market.

Source: FAO and UN Comtrade Database for 2022

4.2. Export market

4.2.1

Global exports

Horticultural exports from Uzbekistan have broken the 1 billion USD mark. Exports have recently been rising by nearly 20% year-on-year. According to data of UN Comtrade, exports of vegetables totalled 478 million USD in 2022 and of fruits 619 million USD. There has been a constant growth in horticultural exports since the start of liberalisation in 2017 from 635 million USD of horticultural exports to 1097 million USD in 2022. Only the Covid-19-year 2020 saw a slight decline in exports.

Exported vegetables are mostly going into the region (65%, mainly Pakistan, Kazakhstan and China), while for fruits, Russia has been the main customer (58%). The devaluation of the Russian Ruble and the eroding purchasing power of Russians due to Russia’s war in Ukraine, however, have made exports to Russia extremely unattractive and fruit exporters are currently busy looking for new, diversified markets.

It needs to be noted that Uzbekistan is not only exporting its own production, but partly also that of Afghanistan (2,570 tons of dried apricots and 1,313 tons of almonds in 2022). In addition, Uzbekistan exports dried grapes of Tajik production.

4.2.2 Exports within Central Asia

Exports within Central Asia are important and constantly growing which is mainly affected by strong and growing purchase power of consumers in Kazakhstan. Demand in each Central Asian country differs from one another:

• Traders from Afghanistan buy dried beans from Uzbek exporters (36,000 tons in 2022 worth about 26 million USD) as well as onions (8,000 tons worth 2 million USD)

• Buyers from Kazakhstan are mostly importing table grapes (64,000 tons worth about 42 million USD) as well as stone fruits (43,000 tons worth 25 million USD) and onions (143,000 tons worth 20 million USD)

• Kyrgyzstan is known to import stone fruits (14,000 tons for 9 million USD), table grapes (20,000 tons for 7 million USD), carrots (49,000 tons for 7 million USD) and melons (28,000 tons for 6 million USD)

• Exports to Tajikistan are rather small. Of importance are only melons (15,000 tons worth 3 million USD) Exports to Turkmenistan are neglectable.

4.2.3 Exports to Russia

Russia has been traditionally the Number One export destination. Such exports have been quite straightforward for Uzbek producers as in Russia, low price has always been much more important than quality Because of an eroding purchasing power of Russian residents as well as the rapid decline in the population, Uzbekistan is now increasingly diversifying its horticultural exports looking not only for new markets in Asia and Europe, but also developing

new products such as frozen vegetables and freeze-dried products. The 2022 figures of horticultural exports to Russia are shown in Table 10.

Table 10: Horticultural export from Uzbekistan to Russia (2022)

Source: UN Comtrade Database for 2022

Besides Russia, also Belarus, which is together with Russia in a customs union, is a considerable trade partner for Uzbekistan, and per capita even more important than Russia. Horticultural exports to Belarus reach 20 million USD.

4.2.4 Exports to other Asian countries

Among the other Central Asian countries those that are close by like Pakistan and China play the greatest role. Of a secondary importance are Turkey, Iran, the Emirates and Azerbaijan. While the trade of horticultural fresh produce with Korea, India and Japan is neglectable, these countries are buying high-value extracts and essences from Uzbekistan’s horticulture.

It is mostly dried beans which are exported to China and Pakistan (140,000 tons for 165 million USD). Other customer of Uzbekistan’s dried beans are Iran (10,000 tons for 10 million USD) and Turkey (3,500 tons for 3.6 million USD)

Pakistan is also an important offtaker of fresh onions from Uzbekistan (33,000 tons for 12 million USD) and Turkey for dried onions (3,000 tons for 7 million USD). Table grapes are exported in considerable volumes to Turkey, the Emirates and Azerbaijan (17,000 tons for 22 million USD).

Of particular interest are the high-value essences and oils which are grown and extracted by Uzbekistan’s horticulture companies and then airfreighted to further away Asian countries (Korea, India, China). They include different extracts for the pharmaceutical, perfumery and food industry, inter alia extracts from liquorice roots (5,800 tons of which 87% go to other Asian countries) A nice example are oleoresins made from a spicy pepper variety. More than 100 tons of them are exported to India (at over 90 USD/kg). Such extracts are used in the Indian food industry as colorant and aroma.

4.2.5 Exports to other European countries

Uzbekistan’s horticultural exports to the EU are predominantly in the categories of frozen, dried and freeze-dried food. The most important partner countries in the EU are (in this order): Germany, Poland, Latvia and Lithuania Among the fresh products, only musk melons are prominent in Latvia, Germany and Poland

For Germany, the most important horticulture products from Uzbekistan are dried vegetables used as raw material in the food industry (1,300 tons for 3.8 million USD), dried pepper (340 tons for 1.6 million USD), dried grapes (480 tons for 0.6 million USD), dried medicinal plants (600 tons for 0.6 million USD), musk melons (900 tons for 0.4 million USD) and almonds (61 tons for 0.4 million USD; data for 2022) The structure of exports to the other EU countries is similar: It is mostly dried fruits and vegetables.

Frozen vegetables from Uzbekistan are not yet being sold in the EU. However, first shipments of commercial batches of frozen berries to Poland can be noted. Frozen fruits and vegetables seem to have a great potential as they are considered high-value products with which Uzbek exporters will be able to capture the wealthiest markets of the world.

5. COMPETITIVENESS AND TRENDS

In the process of diversification of horticultural trade, the major trend is that Uzbekistan is increasingly focusing on its competitive strength. Such diversification will eventually reduce the dependency from the Russian market which in future does not seem to generate the benefits that it was known for in the past. Macroeconomic instability in Russia, the devaluation of the Russian Ruble and the dwindling purchasing power of Russians have made exports to Russia unattractive. In addition, Russia is known for penalising countries with embargoes if they deviate politically from Moscow's line. The example of Moldova shows that phytosanitary reasons are easily put forward to impose an embargo.

Therefore, it is understandable that Uzbekistan is developing new markets in the region (Kazakhstan, China, Pakistan) for its mainstream fresh products (fresh fruits, dried beans), in further-away Asian countries like Korea, India and Japan for its extracts and essences as well as in Europe and the US for dried, freeze-dried and frozen products.

Looking at Uzbekistan’s fresh produce, greenhouse vegetables will in future be produced more for the domestic market as the export market is being lost to Turkmenistan which offers lower gas prices to its producers. The export of table grapes will also go down as the main grape varieties grown in the country do not have very promising prospects in external markets

Growing trends in the fresh segment can be observed for peaches/nectarines, cherries, musk melons, onions and cabbages. This is confirmed by export figures of 2023 and 2024.

Consequently, Uzbek horticulture already features high in the international horticultural news portals “East Fruit” and “Fresh Plaza” Uzbek horticultural companies should soon be seen on the major horticultural trade fairs of the world. While Uzbek companies are still missing at Fruit Logistica in Berlin and Fruit Attraction in Spain, at Macfrut 2024 in Rimini, Uzbekistan had a country stand with 7 renowned companies participating. This was made possible through the support of USAID. To foster market diversification, however, Uzbekistan needs to have country stands on Fruit Logistica and Fruit Attraction, too.

A step back would be the reintroduction of manual controls over export prices for vegetables and fruits as discussed by the Cabinet of Ministers of Uzbekistan in February 2024. The implementation of such price controls would be impractical as prices often change several times a week, prices for individual products depend on a large range of parameters as variety, size and packaging, and Uzbekistan does not have the infrastructure for international price monitoring. Whether to export or not should be the decision of entrepreneurs who would have to press on with exports in years of low prices if the domestic markets does not offer better alternatives such as processing. In this way, any manual price controls would only create new opportunities for corruption in exports (East Fruits, 05.03.2024).

6. INVESTMENT REQUIREMENTS

Horticultural production for the fresh market and access to cold storage are inseparably linked to one another. Every commercial horticultural farm needs to have access to a cold store in order to release the product to the trade when the market is ready to absorb it. For those crops that can be easily stored such as apples, plums, table grapes, potatoes, carrots and onions, farmers usually make more money from cold storage than from production itself knowing that prices are usually lowest at harvest in autumn and then continuously rise over the winter and spring. Farmers therefore need own cold stores (smaller units with smaller chambers), cooperative cold storage or access to private services providing cold storage against payment

For more than 17 million tons of horticultural production intended for the fresh market, Uzbekistan has only some 70 agrological centres and about 1,000 cold stores. The joint capacity of all cold store facilities therefore only allows for storing 5-10% of the total fresh market production. Consequently, post-harvest losses are very high – estimated at about 30%. Of the 146 fruit and vegetable clusters in the country, as many as 126 clusters were reported to have some cold store facilities, but only for a capacity of less than 300,000 tons

Rather than financing heated greenhouses, investment loans should be primarily used to increase cold storage capacity More than 100 million USD of investment loans can be easily absorbed in the short term. If 1000 USD of investment costs are assumed per ton of capacity, then this investment would increase the cold storage capacity in Uzbekistan by 100,000 tons. Such cold stores would need to be equipped with photovoltaic panels to reduce electricity costs. In addition, sorting and packing lines are needed to satisfy the growing demands of international and domestic customers. Likewise, investments need to ensure an uninterrupted cold chain with reefer trucks (90% of all transport) and reefer containers for rail transport (10% of all transport)

For 2021, the National Statistics Agency reported only 179 processing enterprises involved in the processing of horticultural products. This is still a very small number for a country of 20 million tons of horticultural production Although the fresh market usually adds most value to horticultural produce, processing reduces risks and vulnerability of the sector by providing a market when produced volumes exceed the absorption capacity of the fresh market. Recent data of the Ministry of Agriculture suggest that of the 146 fruit and vegetable clusters in the country, only 48 clusters had at their disposal processing plants (about 1 million tons capacity) Of them only 18 clusters had access to drying facilities (about 200,000 tons capacity).

To serve new markets further away (e.g. the EU, the Emirates or the US), Uzbekistan would need more processing capacity in the area of drying, freeze-drying and freezing. This would significantly expand opportunities for Uzbek horticultural producers who could then grow more high-value crops such as strawberries, raspberries and blueberries.