Figure 1. Current estimated food security conditions, first quarter 2008 (Jan to Mar) FULL-SIZE IMAGE Source: FEWS NET

• The price of wheat flour in Afghanistan is 40 to 90 percent higher than the four-year average in markets throughout the country as a result of the current high international prices. Urban and peri-urban populations are likely to be the most vulnerable to the high price of wheat given their dependence on markets, and market interventions targeting these households are needed to prevent a significant decrease in food access.

• To date, 36,000 Afghan workers in Iran have been forcibly repatriated to Afghanistan, and an additional 1.5 million people may be repatriated in the future. These returnees would further complicate the food security situation, as they have limited coping strategies and tend to resettle in urban areas where the high wheat prices are already increasing food insecurity.

• Recent heavy snowfall has caused the death of a hundred people and thousands of livestock. However, the increased snowfall has helped to make up for below-normal precipitation in the beginning of the season; updates on seasonal performance will be available in February and March.

Seasonal calendar and critical events

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High wheat prices restrict food access

The sharp increase in international wheat prices of 40 to 50 percent has had significant impacts throughout the world, and a likely greater impact on the poorer countries in which households spend most of their income on food and, in particular, wheat. (i)

Figure 2. December 2007 retail wheat flour prices, compared to the four-year average in select markets (Afs/kg) FULL-SIZE IMAGE

The average Afghan household spends the largest share (55 percent) of its income on food, which is predominately comprised of wheat flour (NRVA 2005). Thus, wheat flour price increases have a significant effect on both food access and purchasing power of Afghan households. Many people in Afghanistan have linked the increase in local wheat prices to current political instability in Pakistan. However, the primary drivers behind the current price increases are the rise in the international wheat price, the sensitivity of prices in source markets for Afghanistan (Pakistan and Kazakhstan) to international price changes, and transportation costs.

Nominal retail wheat flour prices in Afghan markets that are supplied by Pakistan are significantly lower than those that are supplied by Kazakhstan. With a few exceptions in 2007, Afghanistan has historically been the sole importer of Pakistani wheat flour. Its close proximity to, and extensive border along, southern and eastern Afghanistan reduces transportation costs compared to alternative suppliers in the north. These shared borders exceed 2,000 km, which makes it difficult to control cross-border smuggling. December 2007 retail prices in Jalalabad and Kandahar provinces (located near the Pakistan border) were approximately 40 percent higher than the corresponding four-year average price, which is closely related to world wheat market price increases (Figure 1).

In contrast, Kazakhstan actively trades wheat flour in international markets, including northern Afghanistan. The breadbasket of Kazakhstan is a long distance from the Afghan border, and as a result traders incur high transportation costs. December 2007 retail wheat flour prices in markets in northern Afghanistan such as Maimana, Mazar and Faizabad, were 55 percent, 60 percent and 90 percent respectively greater than the four-year average. After Faizabad, prices in Kabul were the most abnormally high, at 85 percent above average. The significant increase reflects the concentration of wealth and purchasing power in the capital. In addition, wheat markets in Kabul are sensitive to the media and, therefore, more reactive to upward pressure on prices.

Anecdotal reports indicate that the Government of Pakistan has restricted or banned wheat and wheat flour exports to Afghanistan. However, the current wheat market prices in southern Afghanistan do not reflect the likely significant impact of this restriction, but a more general increase in prices. If the restriction continues for a long period, though, wheat prices in the south are expected to increase to even higher levels compared to northern Afghanistan, due to the even further distance that wheat would have to travel from Kazakhstan.

To alleviate the impact of the high food prices, the Government of Afghanistan, the United Nations World Food Program (WFP), the United Nations Children Fund (UNICEF), and the United Nations World Health Organization (WHO) jointly appealed for US$79 million to undertake the following response measures:

1. WFP: food assistance for livelihood protection in rural and urban areas for US$76,756,835.
2. UNICEF: mitigating the impact of food shortages on the nutrition status of children under five years of age and pregnant and lactating women in all affected provinces for US$1,255,645.
3. WHO: prevention of avoidable malnutrition in targeted food-insecure provinces for US$984,400.   

At the initial stages of developing the appeal, the focus was largely on providing assistance to rural areas. As the appeal evolved, the focus was increasingly on urban and peri-urban populations as well, who are likely to be even more vulnerable to the current price increases, for the following reasons:

• Households in urban and peri-urban areas (including smaller population centers) are highly dependent on the market for food, while rural households grow at least a portion their food, with the exception of rural elderly and disabled people.
• Households in urban and peri-urban areas buy food in small quantities throughout the year, while the majority of rural households purchase and store food in bulk for the entire winter.
• Households in urban and peri-urban areas must spend income on a greater variety of necessities, including rent, education, drinking water and electricity. The majority of rural households do not have these expenses: most families own their house, drinking water is free, there is no electricity or education, and other associated expenses (such as uniforms and transportation) are lower.

There are specific groups in rural areas that are particularly susceptible to wheat flour price increases, particularly households that rely on daily wages rather than agriculture production for their income. The majority of these households live in Bamyan, Daykundi, Ghor, Faryab, Wardak, Logar, Samangan and Badghis provinces. However, these provinces are among the areas where WFP pre-positioned 23,000 MT of food prior to the onset of winter due to their regular inaccessibility to food markets during winter.

It is difficult to identify which households have been most affected by the wheat price increases without conducting a country-wide assessment. However, such an assessment would require significant financial resources and would be logistically difficult to carry out given civil insecurity and the physical inaccessibility of much of the country at this time of year.

Given the market nature of the shock, market interventions are appropriate in response (such as policies that facilitate the importation of wheat flour), along with a safety net program that supports a market response and a well-targeted food distribution intervention. The recent decision of the Afghan government to temporarily suspend import taxes on wheat flour and to issue a letter of credit worth US$100 million dollars to facilitate the importing business of Afghan wheat flour traders will help to mitigate the impact of the high prices. However, additional steps will likely need to be considered, such as implementing a temporary market-based or non-market-based safety program, discouraging the hoarding of wheat flour, and eliminating or reducing illegal taxation on roads.

Potential increased forced repatriation of Afghan workers from Iran

Iran has forcedly repatriated 36,000 Afghan refugees from Iran, and media reports indicate that it intends to repatriate 1.5 million more Afghans in the near future. The Afghan government is currently trying to persuade Iran to delay the repatriation until winter has passed to avoid potential humanitarian consequences. For now, the Iranian government has agreed to delay the forced repatriation process for at least the next three months, following the death of 16 repatriated people due to exposure to low temperatures. Nonetheless, this decision could be reversed at anytime should relations between Iran and Afghanistan or Iran and the rest of the world deteriorate.

The ultimate return of 1.5 million Afghans will further complicate the fragile food security situation in Afghanistan. Returnees tend to concentrate in urban areas, where households are experiencing the greatest impact of the wheat price increases. In addition, repatriated Afghans have limited coping strategies and generally depend on their relatives in urban areas. If forced to abruptly repatriate, many Afghan refugees will not have the opportunity to collect on earning that have been withheld by Iranian employers, and these individuals may lose that source of already-earned income.

Seasonal progress and current weather conditions

Heavy snowfall between January 9 and 21 has caused the loss of a hundred lives and thousands of livestock. The winter season started with lighter-than-normal precipitation (Figure 3), which raised initial concerns about potential precipitation deficits, but the recent storms and accumulation have reduced or eliminated the deficit in most of Afghanistan (Figure 4). Below-normal temperatures that have occurred the past weeks and are forecast to continue have prevented the snow from melting so far, which suggests the availability of water for irrigation in the upcoming spring and summer. A mid-season update will be provided by FEWS NET in February, and a seasonal assessment planned for March will provide a clearer indication of the overall performance of the season.

Figure 3. Accumulated precipitation, Oct 1 through Dec 31, current season compared to average   FULL-SIZE IMAGE Source: USGS

Figure 4. Accumulated precipitation, Oct 1 through Jan 20, current season compared to average   FULL-SIZE IMAGE Source: USGS

(i) The increase in the international price of wheat is the result of a number of factors, including: agro-climatic conditions (drought) in key producing areas of Australia and Argentina, substitution in production from wheat to maize for biofuel processing in the United States, and increased grain and beef consumption in populous countries such as China and India as a result of high economic growth and increasing incomes per capita.