IJERD ± International Journal of Environmental and Rural Development (2018) 9-2

Research articleerd

Wheat Market Instability in Afghanistan: A Case Study ofKabul, Mazar-e-Sharif, Bamyan and Ghor Provinces
ZAIGHAM KAZIMI*Tokyo University of Agriculture, Tokyo, Japan
Email: s.z.kazimi@gmail.com

MOHAMMAD ESHAQ RASEKHTokyo University of Agriculture, Tokyo, JapanSAYED REZA HASHEMI
Bamyan University, Bamyan, Afghanistan

SAYED JALIL HASHIMI
Bamyan University, Bamyan, Afghanistan
Received 4 January 2018

Accepted 1 November 2018(*Corresponding Author)

Abstract Wheat is the major crop and staple food in Afghanistan. Though it is a strategic
crop in the country, the nation has never been self-sufficient in wheat domestic production.
Yet as a wheat deficit country, it has been highly reliant on wheat and flour imports
together with international humanitarian food aids. Thereby, such tremendous dependency
on external sources has often led to considerable wheat price fluctuations in Afghan wheatmarkets associated with imports superfluity or distortions over the years. However, despite
the overall weak performance of wheat market in Afghanistan since 2001, the country hasgot somehow relative stability in this regard over the recent years. Therefore, this study wasconducted to address the hurdle through a holistic fashion focusing on both wheat domestic
production as well as market aspects in Afghanistan. For production, the study wasdesigned to detect the key underlying factors behind wheat domestic production shortfalls,
and for market analysis, wheat price trend was evaluated to determine better policy options
so that Afghanistan can achieve better functioning wheat markets in the long run. After all,the findings of this study suggest that there are five mutually exclusive key common factors(invisible factors) behind wheat domestic production quantity and quality failure.
Moreover, regarding wheat market stability, Pakistan has been identified as the key
disruptive player in the beginning while the Central Asian countries particularly Kazakhstan
has recently been the key contributor to wheat market stability in Afghanistan. Therefore,
beside concrete policies to boost wheat domestic production within the country, stronger
trade ties with Kazakhstan certainly ensure better wheat market performance inAfghanistan.
Keywords Afghanistan, wheat market, fluctuations, price stability

INTRODUCTION
According to CSO (2016-17), with an area of 2.9 million ha under cultivation, cereals production
encompasses approximately 37 percent of the co n
total arable land from which nearly 79
percent (2.3 million ha) is allocated for wheat production. Furthermore, with a per capita
consumption of 170 kg per year mostly in the form of flatbread called Nan and contributing toroughly 60 percent of national daily calorie intake in average, wheat plays a vital role in terms offood security in the country (FAO and EU 2013).
Currently, food security is tremendously subject to familie access to wheat all across thenation, hence, any policy adoption to ensure its year-round availability seemingly achieves foodsecurity to a great extent in the country. A study conducted by D So a and Jolliffe (2012)Ⓒ ISERD

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suggests that due to shortcomings with their own production and weak purchasing power from themarket, most of the afghan families adjust themselves by wheat consumption quantity and quality
decline approach in order to deal with food shortage pressures. Therefore, such adaptations entail
serious food insecurity exposures particularly among the most vulnerable population portions suchas pregnant and breastfeeding women, the elderly and children.
Afghanistan has been a wheat deficient country over the decades. Thus, to fill the market
supply-demand gap, the country has been highly dependent on wheat and flour imports from anumber of countries in the region mostly Kazakhstan and Pakistan together with huge amounts ofinternational humanitarian food aids. Therefore, such enormous dependency has often led toconsiderable wheat price fluctuations in Afghan wheat markets associated with imports superfluity
or distortions from the external sources especially from Pakistan.
Exerting insincere trade policies on wheat and flour exports, Pakistan has been a hypocriticaltrade partner with Afghanistan for many years. Dumping its old stocks to Afghan wheat markets
discouraged local producers off-site. As well as, imposing politically driven frequent trade bans
Pakistan has often disrupted wheat market functionality in Afghanistan (Samim, 2016). Forinstance, Paki an strong ban on wheat and flour export to Afghanistan in 2008 led to wheat
price extreme inflation (AFN 28.8/ kg) a price increase greater than a100 percent compared to its
preceding year (AFN 13.7/ kg) (WFP VAM, 2017). According to WFP monthly report, theoverall trend of wheat retail price tends to be very low from 2001 to 2007 (a disincentive to local
producers), highly volatile from 2008 to 2014 (a big concerns for consumers), and yet relatively
stable from 2015 onwards. Hence, this study is to investigate the key underlying factors behind
wheat markets failures as well as the recent relative stability.
OBJECTIVE
This research was designed to break the problem (Wheat Market Instability) down into two distinct
but interlinked aspects defined as Wheat Domestic Production and Wheat Market in Afghanistan.
Hence, within the scope of this study, we tried to target the problem through a holistic fashion
targeting both of the research aspects concurrently in order to detect the most fundamental factors
behind the problem as well as the most potential policy options for further progress in the long run.
Therefore, this study was conducted to answer the following two questions.
1. What are the key underlying factors leading to wheat domestic production quantity and quality
failure?
2. How can Afghanistan ensure a stable wheat market in favor of both consumers and producers in
the long run?
METHODOLOGYFor data collection, we applied semi-structured questionnaires for our interviews and discussions
with wheat farmers, wheat and flour traders and wheat consumers. Hence, using multistage
sampling and focus group methods, in total, we interviewed with 62 wheat farmers, 31 wheattraders (Wholesalers and Retailers) and 69 wheat consumers in the provinces mentioned earlier.
For data analysis, using SPSS, we ran Factor Analysis (Xk = bk1F1 + bk2F2 + . . . bkmFm + Ek) to
detect the core underlying factors (Invisible Factors) behind wheat domestic production
malfunction given the predominant challenges (Symptoms) against wheat farmers in Afghanistan.
For market analysis, we ran Pearson Correlation Coefficient to examine wheat markets integration
between Afghanistan and its trade partners as well as the central and local ones within the country.
RESULTS AND DISCUSSION
Wheat Production in AfghanistanⒸ ISERD

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Wheat production in Afghanistan is closely subject to precipitation circumstances of the year.
Given high uncertainty of spring rainfall and the concomitant variability of yield from the rain-fed
areas, output from the irrigated lands is considered as the main source of wheat domestic supply inthe country. A study carried out by Rajiv et al (2011) argues that in a normal year, nearly 45
percent of land allocated for wheat production is brought under irrigation which contributes toroughly 70 percent of national wheat production while the remaining 55 percent of the area highly
depends on spring rainfall and accounts for the rest 30 percent of the domestic wheat supply.
Wheat production in Afghanistan faces a number of natural calamities and man-induced
challenges leading to its poor functionality in terms of both quantity and quality. Thus, since we got
too many similar and mutually inclusive feedbacks from wheat farmers during our interviews anddiscussions, we came up with factor analysis application so that we can categorize these challenges(symptoms) into bunches of the same root, thereby, discovering the key underlying commonfactors (invisible factors) inducing these hindrances. Table 1 shows that there are five majorcommon factors from which these challenges arise.
Table 1 Total variance explained
Initial eigenvalues

Extraction sums of squared
loadings

Rotation sums of squared loadings

Component
Total% ofvariance

Cumulative%

Total% of
Cumulative
variance%

Total% ofvariance

Cumulative%1

3.660

28.15328.1533.660

28.15328.1533.536

27.19927.1992

2.832

21.78749.9402.832

21.78749.9402.494

19.18646.3863

1.844

14.18164.1201.844

14.18164.1201.822

14.01260.397

4

1.291

9.930

74.051

1.291

9.930

74.051

1.515

11.65572.053

5

1.081

8.312

82.363

1.081

8.312

82.363

1.340

10.31082.363

6.814

6.262

88.625

7.525

4.041

92.666

8.299

2.297

94.963

9.268

2.059

97.022

10.1861.433

98.456

11.119.915

99.37012.061.468

99.83813.021.162

100.000

Extraction Method: Principal Component Analysis. n = 62
Source: Own calculation

Although Table 1 explicitly detects five underlying factors behind the challenges against
wheat production in Afghanistan with their respective and total explaining power, it does not
p o ide an p eci e de ail on each of he fac o na e and e i ence. Hence, in o de o kno
what the factors are exactly, Table 2 gives the ultimate response to this question.

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Table 2 Rotated Component Matrixa
12Component
345

Wheat loss induced by shortage of irrigationwater on a Jerib of land (kg)

.212

.903

.063

.183

-.097

Wheat yield loss associated with land problems
on a Jerib of land (kg)

-.094

.465

.182

.733

035

Potential yield increase given credit services
are available (kg/ Jerib)

.739

-.091

-.257

.293

.462

Enough access to certified seeds

.057

-.218

-.272

.839

.127

Potential yield increase given enough certifiedseeds are available (kg/ Jerib)

.926

-.067

.149-.005-.100

Total amount of fertilizers wheat farmers apply
on a Jerib of land (kg)

-.144

.888

-.156

-.202

.060

Enough application of fertilizers

-.038

.085

.679

.046

.353

Pesticides application by wheat farmers

. 885

-.161

-.166

-.137

.181

Wheat farmers membership to any farmers'organization-.008-.065

-.032

-.089

.950

Wheat farmers receiving extension services-.818-.239-.392-.192.131

Wheat farmers market motivation

-.738

-.030

.305

.073

.059

Wheat farmers having off-farm jobs

.236

-.786

.028

.186

.065

Wheat farmers' formal education

.039

.459

.742

.087

-.048

Extraction Method: Principal Component Analysis. n = 62
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 6 iterations.
Source: Own calculation

As shown in bold in Table 2, three symptoms fall under factor 1, two symptoms fall underfactor 2, two symptoms fall under factor 3, two symptoms fall under factor 4 and finally, one
symptom falls under factor 5. Thus, considering the linkage among the symptoms under eachcategory, we can interpret that the factors are seemingly going to be weak financial status,
i iga ion a ee inefficienc , fa me
lo le el of kno ledge, lo land p od c i i andfa me
indi id ali
e pec i el . P incipall , he mp om (e i ing hindering challenges)
shown in Table 2 are mostly collinear with each other and have loading coefficients somehow withall of the recognized factors. However, factor analysis categorizes them into same groups andintroduces mutually exclusive factors containing the symptoms with the highest loadings.
Wheat Market in Afghanistan
Afghanistan has been a wheat deficit country associated with domestic production shortfalls. Thus,
to fill the supply-demand gap, the country has been highly dependent on wheat imports from anumber of countries in the region such as Kazakhstan, Pakistan, Uzbekistan, Iran and others
together with huge amounts of international humanitarian food aids for many years. Although
wheat production has significantly increased over the recent years in Afghanistan, still domestic
supply is far below its market demand in the country. Figure1 shows that even during the mostfavorable year (2016) for domestic production, still the country imports more than 2.5 million MTof wheat and flour from the external sources.

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6,000Production

Imports

1000 MT

5,000
4,000
3,000
2,000
1,0000Fig. 1 Wheat production and import trends in Afghanistan
Source: USDA, PSD online database

AFN/ kg

After the collapse of Taliban regime in 2001 and the establishment of interim government inAfghanistan, Pakistan used to be the major supplier of wheat and flour to Afghanistan due tohistorically close transactions background coupled with the long shared borderline of 2,640 km
between the two nations. However, exerting hypocritical trade policies over the years as explained
earlier, the country was a major player of wheat market instability in Afghanistan, too. Therefore,
its consistent exploitive trade policies led to stronger trade ties between Afghanistan and theCentral Asian countries particularly Kazakhstan, and as a consequence, wheat price relative
stability over the recent years. Fig. 2 illustrates average wheat retail price fluctuations in
Afghanistan since 2003.
35302520151050Fig. 2 Average wheat retail price in Afghanistan
Source: WFP VAM, Food Security Analysis

As shown in Fig. 2, Paki an do ble-faced trade policies drove significant fluctuations inwheat price over more than one decade with unprecedented shock in 2008. On the other hand,
Afghani an acce o Ka akh an (one of he op en hea -exporting countries in the world)
wheat stocks through trade negotiations has recently ensured relative stability in this regard.
Pakistan lost its wheat market concentration in Afghanistan in favor of Kazakhstan due to two main
reasons: First, Kazakhstan has the least wheat export variability in the region, and second, its
products are by far better in quality and flow safety compared to those of Pakistan.
To confirm the scenario, we considered wheat markets integration through linear correlation
between Afghanistan and some of its major trade partners. Table 3 shows that since 2009 onwards,in general, wheat markets in Afghanistan move more closely with those in Kazakhstan rather thanin Pakistan. Therefore, it explicitly implies that any positive or negative changes in Afghan wheatmarkets since 2009 are more because of wheat exports from Kazakhstan rather than Pakistan.

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Table 3 Afghanistan s wheat market integration with its trade partners (2009 – 2016)
Afghanistan

Kazakhstan

Afghanistan

1

Kazakhstan

.582

1

Pakistan

.349

.258

Pakistan

Iran

1

Iran
.331
-.159
-.395
1
Source: For Afghanistan wheat price (WFP VAM) and for the others (FAOSTAT)CONCLUSION
Unless food diversification policies and programs in the long-run, for the time being, wheat is themainstay of food security in Afghanistan. Hence, any policy option to ensure its year-roundavailability, achieves food security to a great extent in the country. Despite significant progressover the recent years, still wheat domestic production is far below its market demand and as a result,
Afghanistan imports huge amounts of wheat and flour annually to fill the market supply-demand
gap. There are five key underlying factors namely, weak financial status, irrigation water use
inefficienc , fa me lo le el of kno ledge, lo land p od c i i and fa me indi id ali
respectively leading to wheat production malfunction in the country. Therefore, unless these factors
are addressed concretely, Afghanistan will never reach self-sufficiency in this regard. Moreover,ega ding hea impo , Paki an nfai ade policie mostly due to politics has been one of thekey factors behind wheat market instability in Afghanistan while the Central Asian countries
particularly Kazakhstan has recently emerged as an effective trade partner with Afghanistan bysupplying more stable and higher quality products to Afghan wheat markets.
ACKNOWLEDGEMENT
Our special thanks go to Japan International Cooperation Agency (JICA) for providing thescholarship. We express our gratitude to Tokyo University of Agriculture specially Prof. Dr.
Tsutomu Takane who supervised this study. Our sincere thanks to all our respondents for theirexperience sharing and eventually, we are humbly grateful to ISERD for helping us share ourfindings with other fellows around the world through its 9th ICERD held in Myanmar.
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FAO and European Commission Humanitarian Aid. 2013. Wheat markets and food security in Afghanistan.
https://tinyurl.com/y8wjjce7
FAOSTAT. Online database. http://www.fao.org/faostat/en/#home
Rajiv, K., Sharma, Osmanzai, M. and Ward, R. 2011. Wheat research: A crucial prerequisite to food securityin Afghanistan. https://tinyurl.com/y98qxc6a
Samim, M. 2016. Paki an: Afghani an
nreliable breadbasket. The diplomat, https://thediplomat.com/201
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WFP VAM. 2017. Food security analysis. http://vam.wfp.org/CountryPage_overview.aspx?iso3=AFGⒸ ISERD127