Afghanistan Joint Appeal for the Humanitarian Consequences of the Rise in Food Prices 2008

23 January 2008

Eighty percent of the population of Afghanistan relies on agriculture, which contributes more than 50% to GDP.  Wheat, used to make bread, is the staple food of the vast majority of Afghans and the most important food crop in the domestic economy.

Compared to the drought year of 2006, 2007 was considered to be a good agricultural year[1], with cereal production estimated at 5.6 million tonnes compared to 6.1 million tonnes of domestic requirements (wheat represents approximately 80% of the country’s total cereal production).  Nonetheless, many households have been unable to meet their basic food needs and are highly susceptible to volatility in the price of this staple food.

From January 2007 to January 2008 the price of wheat flour across Afghanistan increased by between 40% and 80%, with a country-wide average of 58%.  Such dramatic price changes increase the risk of hunger, particularly during the winter and lean period leading up to the mid-year main harvest, as higher prices mean that wheat flour becomes unaffordable to a larger segment of the population.  This places them at risk of sliding deeper into food insecurity and, hence, elevates their vulnerability to shocks. [2]

There are a number of reasons for the enormous increase in the price of wheat flour in Afghanistan.  International prices of cereals, including wheat, have increased markedly in the past 12 months.  On average, global wheat prices rose by nearly 100% since the start of 2007.  There are several explanations for this, including the unprecedented growth in cereals demand for bio-fuels; significant growth in demand for cereals as animal feed as populations, especially in Asia, have become better off and thus can afford to consume more meat; and poor harvests in some of the largest cereal producing countries, including Australia.  In recent years both India and Pakistan, previously net wheat exporters, have become sizeable net importers.

Wheat flour prices in Pakistan, the main source of food imports for Afghanistan, have also risen in the past 12 months, by about 15% for domestic consumers.  More important, increasing cereal shortages in Pakistan, and the recent spike in political instability, has led to more restrictions on the export of highly subsidised wheat flour.  This has been at least one of the outcomes resulting from concerns that traders have taken advantage of low Pakistan prices and political uncertainty to extract higher profits from Afghan consumers.  Finally, within Afghanistan, the worsening security has contributed to an increase in transportation costs of all commodities, including wheat flour. (See ANNEX I)

The Government of Afghanistan has limited capacity to import wheat or wheat flour and as yet maintains no grain reserves that might be used to help offset higher prices.  Nonetheless, some steps are already being taken to reduce the impact, including the recent temporary removal of the import tax on both wheat and wheat flour and tax reductions for other staple food items.

Afghanistanis therefore requesting assistance from international partners to provide a temporary safety net for 425,000 vulnerable rural and urban households (2.55 million beneficiaries) with low purchasing power, and thus help them to meet their needs through the provision of targeted food assistance distributed in selective locations.

[1]Even in good years wheat production does not meet domestic requirements due to existing agricultural practices, lack of improved seeds and fertilizers, harsh growing conditions, and limited irrigation (source:  Northern Wheat Trader Survey and Afghan Food Security).

[2]In Kabul, a family of seven can earn USD 1.14 a day, if the head of the family is fortunate enough to find employment, while they need to spend US$ 0.63 to buy twenty-one loaves of bread for the family. This implies that over 60 percent of an individual’s income is spent only on bread.    

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23 January 2008

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