Evaluating Cotton Production Economics in Azerbaijan

Prior to the collapse of the Soviet Union, Azerbaijan was one of the leading cotton producers among the Soviet states. In the late 1980’s, Azerbaijan was producing around 200,000 metric tons of lint cotton on harvested land that ranged between 280,000 and 300,000 hectares (690,000 to 750,000 acres).  When In the years following Azerbaijan’s declaration of independence 1991, numerous factors contributed to a decline in the Azerbaijan cotton industry over the next two decades.  Among the contributing factors was the distribution of farmland in small acreage plots.  In 2009, Azerbaijan cotton hectares reached a low point at 21,000 hectares.  In an effort to revive the cotton industry in recent years, the Azerbaijan government implemented plans that included subsidizing fertilizer and pesticide expenses, irrigation equipment, and other farm inputs.  By 2017, cotton acreage climbed to 136,000 hectares with around 60 percent being farmed by small acreage producers.  The government’s current plan is for acreage to scale back to the 100,000 to 110,000 hectares range, while increasing yields.  The paper will focus on several important economic questions related to Azerbaijan cotton, including an assessment of the cost of production for both small and large cotton producers, small producer production contracts, and factors that may be hindering profitability and growth.