Agriculture in arid central Asia is heavily dependent on irrigation. Arable land comprises only 9 percent of the territory because much of the land is desert. Only 1 percent is covered by permanent crops, about 3 percent is occupied by forests, and 46 percent is permanent pastures used by sheep and other livestock. Under the Soviet regime vast formerly-deserted terrain has been reclaimed for cotton growing, and agriculture was collectivized into large state-controlled farms. These lands remain under the control of the Uzbekistani government. The cotton sector is still the most important employer and export producer, characterized by the extensive use of machines and chemicals. The drying up of the Aral Sea due to excessive irrigation in the cotton fields has resulted in growing concentrations of pesticides and salts blown from the exposed bed of the lake. Mismanaged irrigation has contributed to soil contamination, desertification , water pollution, and many health disorders.
Apart from cotton, leading products include vegetables, fruits, grain, livestock, and animal products, including the world-famous karakul sheep. In 1998, President Karimov threatened to impose criminal penalties on local leaders who anticipated food shortages and restricted the sale of food at market in order to stockpile food locally. In 2000 the grain and cotton harvests were low due to persistent drought and mismanagement of water resources. The government would not raise water prices to encourage farmers to use it more efficiently, because allowing the sale of water at market prices defies the communist ideal of a state-run economy. To ensure that water shortages would not happen again in 2001, the government reached an agreement with Tajikistan (where its rivers originate) to cooperate on water use. Another pricing problem exists in the cotton industry: the domestic cotton fiber price was just 43 percent of the world price in 2000. In order to achieve self-sufficiency in grain production, the government is still shifting land from cotton to grain production, which deprives the economy of export revenue. A ton of cotton on the world market in 2000 was worth around US$1,100 in export revenue, while a ton of grain was worth approximately US$200.