United States 

Department 

of Agriculture 

www.ers.usda.gov 

 A Report from the Economic Research Service

Abstract

Wheat is a key staple food in Afghanistan, accounting for over half the caloric 

intake of the population. Although Afghanistan imports wheat and fl our from 

a number of neighboring countries, Pakistan tends to supply more than half 

of these imports. Afghanistan’s food supply network broke down in 2008 due 

to a confl uence of events, including shortfalls in Pakistani and Afghan wheat 

production and Pakistan’s bans on wheat and fl our exports. Substantial price 

hikes were needed to bring increased fl our shipments from Kazakhstan through 

the ineffi cient transport system from the North. Afghanistan will remain subject 

to supply disruptions and price spikes as long as its agricultural production 

remains highly variable and weak transportation links limit the country’s ability 

to diversify its sources of imported grain. Improvements in infrastructure could 

enable Afghanistan to diversify its wheat and fl our imports and bring in supplies 

at a lower cost.

Keywords: Afghanistan, volatility, Pakistan, wheat, fl our, imports, food 

security, infrastructure, agriculture

Acknowledgments

Appreciation is extended to Cheryl Christensen, Chief of the Food Security 

and Development Branch of USDA’s Economic Research Service (ERS), 

and Mathew Shane, leader of the ERS Macroeconomics group, for their 

support and comments; to John Dyck, Maurice Landes, and Ed Allen of ERS, 

Teresa McKeivier of USDA’s Foreign Agriculture Service (FAS), and Kevin 

McNamara of the Agricultural Economics Dept. of Purdue University for 

their horough reviews; and to FAS-Islamabad staff members Rashid Raja and 

M. Shafi q-Ur-Rehman for their valuable suggestions and helpful comments. 

Special thanks are extended to Courtney Knauth for editorial assistance and to 

Curtia Taylor for layout and design. 

Suresh Persaud, spersaud@ers.usda.gov

Price Volatility in 

Afghanistan’s Wheat Market

WHS-10d-01

May 2010

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction ........................ 2

Afghan Wheat Demand 

Conditions Appear To 

Have Strengthened .......... 3

Weather and Warfare 

Destabilize Afghan 

Wheat Production ............ 4

Afghanistan Is Strongly 

Dependent on Wheat 

Imports from Pakistan ..... 6

Afghan and Pakistani 

Markets Are Closely 

Connected ........................ 9

The Afghan Wheat 

Market Is Vulnerable to 

Disruptions in Supplies 

from Pakistan ................. 13

Conclusions ...................... 15

References ........................ 16

Appendix .......................... 18
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Introduction

Wheat is a key staple food in Afghanistan, accounting for over half of 

the caloric intake of the population. It is also Afghanistan’s major crop, 

accounting for roughly 70 percent of the cultivated land area (Chabot and 

Dorosh, 2007). However, the country’s domestic production of wheat is 

inadequate for meeting demand and, moreover, is subject to sizable weatherinduced fl uctuations. Imports from surrounding countries have been required 

in order for Afghanistant to meet its need for wheat. 

The major global wheat exporters are the United States, Canada, Australia, 

the European Union-27, the former Soviet Union (including three major 

wheat exporters: Russia, Ukraine, and Kazakhstan), and Argentina. In most 

years, these countries account for about 90 percent of world wheat exports. 

However, with the exception of Kazakhstan, none of the leading exporters 

is a signifi cant supplier of wheat to Afghanistan. Historically, Pakistan has 

supplied the bulk of Afghanistan’s imported wheat and wheat fl our. 

The period from 2006 to 2008 witnessed an unprecedented surge in global 

agricultural prices, caused by a number of factors, including production 

decreases in major exporting countries (Trostle, 2008). Afghanistan’s 

2008 shortfall in wheat output was even more severe than that of major 

exporters—wheat production in Afghanistan fell to 1.5 million metric tons 

(MMT), approximately 55 percent below the previous year (USDA, 2009c).1

Given the extreme contraction in domestic production, consumer well-being 

depended on access to international markets for wheat and wheat fl our.

The production decreases of 2006-08 placed substantial pressure on the 

Afghan grain market, as well as on the markets that supply grain to Afghanistan, effectively constituting a stress test of Afghanistan’s supply network. 

This report analyzes the role imports have played in stabilizing Afghan wheat 

prices by mitigating the effects of shortfalls in domestic production. The 

author also assesses whether Afghanistan’s internal wheat markets are suffi -

ciently connected with international markets to compensate for the volatility 

in domestic output. 

1 In Argentina and Kazakhstan, 

2008/09 wheat production decreased by 

50 and 24 percent, respectively. Wheat 

output increased for the other major 

exporters. For the eight major exporters 

(Argentina, Australia, Canada, EU-27, 

Kazakhstan, Russia, the Ukraine, and 

the United States), total production in 

2008/09 was approximately 380 million 

metric tons, 24 percent above that of the 

previous year (USDA, 2009c).
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Afghan Wheat Demand Conditions

 Appear To Have Strengthened

Afghanistan’s economy grew substantially between 2002 and 2007, fueled by 

sharp increases in agricultural output in many regions, partly due to the return 

of more favorable weather and investments in infrastructure. On October 

7, 2002, the Government of Afghanistan issued a standardized currency to 

reduce the likelihood of counterfeiting, a practice that warlords had begun in 

late 1996 (Hale, 2002). In early 2003, the Government completed its currency 

reform (World Bank, 2005) and issued the New Afghani to replace the preexisting old Afghani, with a conversion rate of 1,000 old to 1 New Afghani 

(Maletta, 2004). Based on data from the International Monetary Fund (IMF), 

offi cial (non-opium) real (adjusted for infl ation) gross domestic product 

(GDP) grew at an annual rate of 12 percent between 2002 and 2007 (IMF, 

2009). However, this rapid growth occurred from a low base—Afghanistan 

is still one of the poorest countries in the world, with a per capita GDP of 

$352 ($737 PPP2).

Household surveys demonstrate the centrality of wheat in Afghan food 

consumption patterns, as wheat accounts for approximately 60 percent of 

total caloric intake (Government of Afghanistan, 2003), or 162 kilograms 

per person per year (2002-08 average). However, considerable uncertainty 

surrounds estimates of both the population and consumption (approximated 

as the sum of domestic production and imports), implying that per capita 

consumption fi gures are likewise uncertain (see appendix, “Data Sources and 

Uncertainties”). Over time, rising incomes and dietary diversifi cation will 

likely diminish the role of cereals in the Afghan diet, but wheat is likely to 

retain its importance for the foreseeable future.

2 PPP=Purchasing power parity, a 

concept in which a given amount of 

U.S. dollars will purchase the same 

bundle of goods in all economies. In 

calculating purchase power parity, 

adjustments are made to exchange rates 

to raise or lower the relative value of 

currencies to equilibrate purchasing 

power.
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Weather and Warfare Destabilize 

 Afghan Wheat Production

Approximately 45 percent of Afghanistan’s wheat acreage in a normal year is 

irrigated, accounting for about 70 percent of production. The remaining 55 

percent of wheat acreage relies on timely rainfall and typically provides the 

remaining 30 percent of domestic production. Winter snowfall in the mountain ranges of central Afghanistan supplies over 80 percent of the country’s 

annual precipitation. Snowmelt in the spring is the major source of irrigation 

water, running through rivers and streams that originate in the mountains. 

Generally, little rainfall occurs during the main wheat-growing period from 

April to September, so the timing and duration of the annual snowmelt is a 

key factor in the volume of irrigation water and the length of time that it is 

available (USDA, 2008a). 

In the early 1990s, wheat production was about 40 percent below the 

amounts achieved during the years just before the Soviet invasion in 1979 

(fi g. 1). 

Grain production deteriorated from the mid-1980s through the early 1990s 

due to the combined effects of prolonged droughts and the destruction of 

irrigation networks and infrastructure during years of confl ict, fi rst between 

Afghan and Soviet forces and then during the civil war that followed the 

1989 Soviet withdrawal. Although favorable growing conditions allowed 

wheat output to rebound in 1997-98, successive droughts in the following 

years led to substantial crop shortfalls in irrigated as well as rain-dependent 

areas, particularly in 2000 and 2001. Growing conditions were relatively 

1975 77 79 81 83 85 87 89 91 93 95 97 99 2001 03 05 07

1,000 metric tons

Imports

Production

Notes: Includes flour imports expressed in wheat equivalent. Data are on a marketing year basis. For example, 2008 refers to the 

period from July 2008 - June 2009. 

Source: USDA, Foreign Agricultural Service, Production, Supply and Distribution (PSD) online database.

6,000

5,000

4,000

3,000

2,000

1,000

0

Figure 1

Wheat and flour supply in Afghanistan
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favorable between 2002 and 2007. The wheat harvest in 2003 was estimated 

to be 3.55 million metric tons, a level that Afghanistan achieved again in 

2005 and approached in 2007. 

The years of favorable wheat harvests were followed by below-average 

levels of rain and snow during the 2007/08 wet season, which sharply 

reduced Afghanistan’s 2008/09 wheat crop. An atypical, early snowmelt in 

2008 became problematic, as river and stream fl ows crested before traditional surface-irrigated crops could make much use of the water. Farmers 

were left with an unusually narrow window of access to irrigation water for 

both spring and summer crops. Extremely low precipitation levels in the 

spring and early summer months of 2008 exacerbated the water defi ciencies 

(USDA, 2008a). Consequently, Afghanistan experienced the worst growing 

conditions since 2000, and wheat output fell accordingly; the 2008/09 crop of 

1.5 million metric tons was approximately the same as in 2000/01.
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Afghanistan Is Strongly Dependent on 

 Wheat Imports from Pakistan

Imports of wheat and fl our have helped Afghanistan stabilize consumption 

levels and meet the food need s of its growing population. These imports 

move even into remote areas of Afghanistan; with most rural households 

contributing little or no surpluses to Afghanistan’s wheat market, imported 

fl our has become more common in rural areas (Schulte, 2007). However, 

there is a paucity of empirical information on wheat sales within Afghanistan. 

In 2003, the total quantity of domestically produced wheat that was marketed 

may have amounted to one-fourth of the country’s domestic production 

(Chabot and Dorosh, 2007), although in drought years marketed surpluses 

would be far lower. In a typical year, the northern region of Afghanistan 

accounts for the vast majority of the relatively small quantity of wheat that is 

marketed.

Afghanistan is a landlocked country, bordered on the west by Iran, on the 

south and the east by Pakistan, and on the north by Turkmenistan, Uzbekistan, and Tajikistan (fi g. 2). Afghanistan imports wheat and fl our from a 

number of neighboring countries. However, with a shared border of 1,600 

kilometers and a long history of trade, Pakistan is the dominant supplier of 

wheat—primarily in the form of fl our—to Afghanistan (Khan, 2007). For 

the period July 2001–July 2002, Maletta (2004) fi nds that Pakistan’s share of 

the Afghan import market for wheat and wheat fl our was 78.8 percent, while 

the shares for Kazakhstan and “other countries” were 19.1 and 2.1 percent, 

respectively. Chabot and Dorosh fi nd that, on average over the period 

2000/01–2002/03, Pakistan accounted for 59 percent of Afghanistan’s wheat 

and fl our imports; Kazakhstan’s share was 34 percent, while “other countries” accounted for only 7 percent. Khan’s (2007) fi gure is 80 percent for 

Pakistan’s share of Afghan imports (the time period for the author’s estimate 

is unclear). Based on data from the United Nations Food and Agriculture 

Organization (FAO, 2009), 85 percent of Afghanistan’s imported wheat fl our 

was of Pakistani origin in 2005. Schulte (2007) estimated that approximately 

60 percent of Afghanistan’s wheat and fl our imports were from Pakistan in 

2005/06 and 2006/07.

The Government of Pakistan (GOP) has implemented policies aimed at 

improving the availability of food for its population (Dorosh and Salam, 

2006) (see box, “Pakistan’s Wheat Policies,” for a brief summary). At the 

same time, Pakistani traders have strong incentives to move wheat and fl our 

into relatively high-priced nearby markets.3

The private millers and traders of Pakistan work closely with Afghan traders 

(Khan, 2007). Pakistani wheat fl our is widely accepted by Afghan consumers 

because of its quality (Schulte, 2007), and Pakistani mills extend credit to 

Afghan traders seeking to purchase fl our (Khan, 2007). 

Imports from Pakistan have helped to stabilize wheat consumption in 

Afghanistan. Domestic wheat production in Afghanistan has tended to be 

unstable, as indicated by a measure of temporal variability known as the 

3 Pakistani wheat exports are largely 

sold to India and Iran; Pakistani fl our 

is largely sold to Afghanistan (USDA, 

2008b).
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Figure 2

Afghanistan is strategically positioned between Central Asia and the Middle East

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Afghanistan and surrounding countries

National capital

Provincial capital

Provinces

International boundary

Jalalabad

Pakistan’s Wheat Policies

The Government of Pakistan (GOP) intervenes in domestic wheat markets by procuring wheat from farmers through 

Provincial Food Departments (PFDs) at a support price. The GOP also releases wheat to the provinces for sale to the fl our 

mills at a government fi xed-issue price (USDA, 2009a). Pakistan’s fl our milling industry, which is privately operated, 

obtains most of its wheat from PFDs based on a fi xed quota (Khan, 2007).

These interventions, which tend to involve sales of wheat to fl our mills at below-market rates, generate substantial profi ts 

for millers. They incur large fi scal costs for the Government, however, because the issue prices do not cover the full cost of 

procurement (domestic or imported), storage, and handling (USDA, 2009a; Dorosh and Salam, 2006). The quota system 

has provided incentives to both new and existing millers, thereby encouraging overexpansion and excess capacity in the 

milling sector. The growth of Pakistan’s fl our mills has been concentrated in provinces neighboring Afghanistan, and a 

large number of mills operate only when they are able to purchase subsidized wheat from the Government (Khan, 2007). 

Pakistan’s domestic policies likely encourage movements of fl our rather than wheat into Afghanistan, possibly discouraging 

investment in fl our mills in Afghanistan.
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coeffi cient of variation.4 With a coeffi cient of variation of 35 percent over 

the period 2000-08, Afghanistan’s wheat production has exhibited more than 

fi ve times the variability of Pakistan’s (table 1). 

Moreover, wheat production in Afghanistan is only weakly correlated with 

production in Pakistan, with a correlation coeffi cient of 0.18. Access to 

relatively more stable supplies of Pakistani wheat and fl our has dampened 

fl uctuations in Afghan consumption. Afghan production has been three-anda-half times more variable than consumption, as imports have partially offset 

poor harvests due to droughts. 

Kazakhstan, the largest exporter of wheat in the region and in recent years 

a dominant fl our exporter, does not share a border with Afghanistan. The 

quantities of Kazakh wheat and fl our that were exported to Afghanistan 

arrived via circuitous routes through Tajikistan, Uzbekistan, and Turkmenistan5 (Khan, 2007).

4 The coeffi cient of variation is computed as the ratio of the standard error to 

the mean, where the standard error in the 

numerator is from a regression on a time 

trend. This ratio is expressed in percentage terms by multiplying it by 100.

Table 1

Variability in Pakistani and Afghan wheat and fl our markets 

Pakistan Afghanistan

Year Production Production Imports Consumption

1,000 metric tons

2000 21,079 1,469 574 2,043 

2001 19,024 1,597 1,000 2,597 

2002 18,227 2,686 500 3,186 

2003 19,183 3,550 450 4,000 

2004 19,500 2,293 1,000 3,293 

2005 21,612 3,500 500 4,000 

2006 21,277 3,100 1,400 4,500 

2007 23,300 3,350 2,300 5,650 

2008 21,500 1,500 3,800 5,300 

Standard error 1,322 884 772 402 

Mean 20,522 2,561 1,280 3,841 

Coeffi cient of 

variation 6 35 60 10 

Notes: Wheat fl our quantities are included on a wheat-equivalent basis. Consumption is approximated as the sum of production and imports. Data are on a July-June marketing year 

basis. 

Sources: Production, import, and consumption quantities are from USDA’s Production, Supply 

and Distribution online database; standard errors, means, and coeffi cients of variation are 

author’s calculations.

5 Based on data from the World Trade 

Atlas and USDA’s Production, Supply 

and Distribution database, Kazakhstan 

accounted for, on average, 25 percent 

of Afghan wheat and fl our imports over 

2004-08.
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Afghan and Pakistani Markets 

 Are Closely Connected

Pakistan has, for the most part, been a reliable supplier of wheat and fl our to 

Afghanistan, and grain markets in Afghanistan have continued to function 

despite armed confl icts, frequent droughts, and poor infrastructure. Although 

access to some areas of Afghanistan is extremely diffi cult, imported foods 

are seen in almost all markets throughout the country, indicating that food 

reaches even the most isolated areas (World Food Programme, 2005). 

Impediments such as transportation bottlenecks and instability have not 

generally prevented imports or interregional wheat and fl our movements, 

however, because there are well-established formal and informal arrangements that enable ample commerce in these commodities (Schulte, 2007). 

Afghanistan’s Ring Road has a critical role in removing physical constraints 

to trade. Extending from Kabul to Kandahar to Hirat before looping back 

to Kabul, the Ring Road was designed to link major cities in Afghanistan. 

Although not yet complete, the road has already generated economic benefi ts 

by enhancing connectivity among regions of the country. Approximately 

60 percent of Afghans now live within 50 kilometers of the road (USAID, 

2009a).

Pakistani fl our passes through key wholesale markets in Kandahar and 

travels even into the western part of Afghanistan near the Iranian border. The 

majority of the fl our in the Hirat markets is of Pakistani origin, while very 

little is from Iran. Kazakh fl our is routed to Hirat via the northern border 

post of Tourghundy, directly above Hirat. Flour movements from Hirat into 

the Badghis and Ghor provinces have been reported. Pakistani fl our also 

arrives at Jalalabad/Torkham, and from there it is routed to Kabul (Schulte, 

2007). 

In contrast to many of the other regions of the country where Pakistani fl our 

dominates, in the Mazar area of Afghanistan, Uzbekistan and Kazakhstan 

account for the dominant share of imported wheat. Pakistan faces a competitive disadvantage against low-priced Uzbek fl our. After arriving in Mazar, 

wheat and fl our from Central Asia are transported to the north and central 

regions of Afghanistan and, to a lesser extent, to Kabul (Schulte, 2007).

Using monthly data for January 2002 through June 2005, Chabot and Dorosh 

(2007) conducted formal econometric tests to explore issues of (a) market 

integration between major markets within Afghanistan, and (b) market 

integration between Pakistani and Afghan markets. Chabot and Dorosh’s 

co-integration results suggest that wheat prices in major markets in Afghanistan and in Lahore, Pakistan, tend to move together in the long run. 

In addition, regional wheat and fl our markets in Afghanistan appear, on the 

basis of price behavior, to be reasonably well connected with one another. 

Prices across different localities exhibit the same general movements and 

patterns (fi gs. 3 and 4). 
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For example, wheat and fl our prices in the northern (wheat surplus) region 

of Mazar-e-Sharif tend to move together with wheat and fl our prices in the 

southern (wheat defi cit) region of Kandahar, as indicated by correlation coeffi cients of 0.92 and 0.95, respectively (tables 2 and 3). Co-movements are 

lowest, though still considerable, between the relatively remote area of Faizabad and the other regions of the country. Since Pakistan is a major player in 

the Afghan grain market, wheat and fl our prices from Peshawar in Pakistan 

are reasonably well correlated with prices in Afghan markets. In contrast, 

wheat prices in Afghanistan and the United States are not as highly correlated 

(tables 2 and 3). 

Dec-99 Mar-02 May-04 Jul-06 Sep-08

Source: World Food Programme (WFP) of the United Nations.

1

0.8

0.6

0.4

0.2

0

Figure 3

Wheat prices in Afghanistan

Retail ($/kg)

Kabul Kandahar Jalalabad

Hirat Mazar Faizabad

Dec-99 Mar-02 May-04 Jul-06 Sep-08

Source: World Food Programme (WFP) of the United Nations.

1.2

1.05

0.9

0.75

0.6

0.45

0.3

0.15

0

Figure 4

Flour prices in Afghanistan

Retail ($/kg)

Kabul Kandahar Jalalabad

Hirat Mazar Faizabad
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Although Afghanistan’s production of wheat fl uctuated sharply during 2000-

06, domestic wheat prices were fairly stable, which would suggest that trade 

helped to dampen price variability in Afghanistan within this timeframe. 

From January 2000 to December 2007, wheat prices in Afghanistan followed 

those in Peshawar, Pakistan reasonably closely (fi g. 5). The same is true 

for fl our prices, although Pakistan’s fl our price data are only available from 

December 2003 onward (fi g. 6). 

Table 2

Correlation coeffi cients for wheat prices in Afghanistan, Pakistan, and the United States, 

January 2000-April 2009 

Afghan markets United States Pakistan

Country/Region Kabul Kandahar Jalalabad Hirat Mazar Faizabad (LA gulf ports) (Peshawar)

Afghanistan

Kabul 1.00

Kandahar 0.97 1.00

Jalalabad 0.98 0.98 1.00

Hirat 0.98 0.98 0.98 1.00

Mazar 0.94 0.92 0.94 0.95 1.00

Faizabad 0.86 0.84 0.84 0.87 0.90 1.00

U.S. (LA Gulf ports) 0.62 0.59 0.62 0.62 0.65 0.57 1.00

Pakistan (Peshawar) 0.94 0.92 0.92 0.92 0.88 0.80 0.76 1.00

Source: Computed by author using data from Wheat Data: Yearbook Tables for U.S. and Foreign Wheat Prices (USDA, 2009b); Price Analysis in 

Afghanistan (World Food Programme, 2009); and Monthly Review of Price Indices, Government of Pakistan (various issues).

Table 3

Correlation coeffi cients for prices of wheat fl our in Afghanistan and Pakistan, 

December 2003-April 2009 

Afghan markets Pakistan

Country/Region Kabul Kandahar Jalalabad Hirat Mazar Faizabad (Peshawar)

Afghanistan

Kabul 1.00

Kandahar 0.99 1.00

Jalalabad 0.99 0.99 1.00

Hirat 0.98 0.98 0.98 1.00

Mazar 0.95 0.95 0.95 0.94 1.00

Faizabad 0.90 0.90 0.89 0.88 0.94 1.00

Pakistan (Peshawar) 0.89 0.87 0.88 0.87 0.90 0.91 1.00

Source: Computed by author using data from Price Analysis in Afghanistan (World Food Programme, 2009), and 

Monthly Review of Price Indices, Government of Pakistan (various issues).
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Notes: Pakistani wheat prices are Peshawar wholesale prices; Afghan wheat prices are simple 

averages of prices from Kabul, Jalalabad, Mazar, Faizabad, Hirat, and Kandahar. 

Sources: U.S. wheat prices are from Wheat Data: Yearbook Tables for U.S. and foreign wheat 

prices (USDA, 2009b); Afghan wheat prices are from the U.N. World Food Programme’s Price 

Analysis in Afghanistan. Pakistan’s wheat prices are from Government of Pakistan, Monthly 

Review on Price Indices (various issues).

Figure 5

International wheat prices

U.S. $ per metric ton

Jan

00

Jul

00

Feb

01

Aug

01

Mar

02

Jan

06

Jul

06

Feb

07

Sep

07

Mar

08

Oct

08

Sep

02

Apr

03

Nov

03

May

04

Dec

04

Jun

05

0

100

200

300

400

500

600

700

800

U.S.A Pakistan Afghanistan

Notes: Pakistani flour prices are Peshawar retail prices; Afghan flour prices are simple 

averages of prices from Kabul, Jalalabad, Mazar, Faizabad, Hirat, and Kandahar. 

Sources: Afghan flour prices are from the U.N. World Food Programme’s Price Analysis in 

Afghanistan. Pakistan’s flour prices are from Government of Pakistan, Monthly Review on 

Price Indices (various issues).

Figure 6

Flour prices in Afghanistan and Pakistan

U.S. $ per metric ton

Dec

03

Jul

04

Jan

05

Aug

05

Mar

06

Sep

06

Apr

07

Oct

07

May

08

Dec

08

0

200

400

600

800

900

700

500

300

100

1000

Pakistan Afghanistan
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The Afghan Wheat Market Is Vulnerable 

 to Disruptions in Supplies from Pakistan

Afghanistan’s heavy reliance on Pakistan for imported wheat leaves Afghanistan vulnerable to supply shortfalls in Pakistan, as well as to Pakistan’s 

export bans. The Government of Pakistan (GOP) overestimated the country’s wheat production in 2007, and in April of that year it removed the ban 

on wheat exports that had been imposed in 2003. On May 25, 2007, the 

GOP once again imposed an export ban, but not before Pakistani traders 

had exported 500,000 metric tons of wheat in response to high international 

prices (USDA, 2007). Pakistan’s wheat harvest decreased in 2008 to 21.5 

million metric tons from 23.3 million metric tons in the previous year. Also 

contributing to Pakistan’s tight market in 2008 were its record exports of 

approximately 2 million metric tons (despite the export ban), mainly fl our to 

Afghanistan, through unoffi cial channels (USDA, 2009a; USDA, 2008b). 

Pakistan’s ban may have had some effect on wheat and fl our movements in 

the sense that exports would have been even greater in the absence of trade 

restrictions. However, two additional factors contributed to reducing exports 

to Afghanistan: Pakistan itself had to resort to importing wheat later in 2008 

(USDA, 2009a), and there was increased armed confl ict in major transport 

corridors along the Pakistani border (USDA, 2009d). The supply situations in Afghanistan and Pakistan allowed Kazakhstan to increase its exports 

to Afghanistan to an unprecedented level of 1.3 million metric tons, or 34 

percent of the Afghan import market. However, substantial price hikes were 

needed to bring these increased Kazakh fl our shipments through the very 

ineffi cient transport system from the North. Thus, increased exports from 

Pakistan and Kazakhstan were not suffi cient to fully offset the relatively large 

contraction in Afghanistan’s 2008 wheat harvest. 

The consequences of the supply shortfall in 2008/09 were twofold. 

Consumption in Afghanistan fell to 5.3 million metric tons in 2008 from 5.7 

million metric tons in the previous year, although these fi gures are uncertain as data on stocks are not available. In addition, the 2008 price spikes 

in Afghanistan far exceeded those observed in either Pakistan or the United 

States (fi gs. 5 and 6). Up until December 2007, the Afghanistan-Pakistan 

price gaps for wheat and fl our were relatively low and stable. This changed 

dramatically in the ensuing months, during which prices in Afghanistan rose 

substantially faster than those in Pakistan. For example, in May 2008, the 

price of wheat in Afghanistan was $751 per metric ton, while in Pakistan and 

the United States it was $350 and $255 dollars per metric ton, respectively. It 

is likely that Afghanistan could have avoided such dramatic price increases 

if the country had lower cost access to more diversifi ed international sources 

of wheat and fl our, although Afghanistan would not have altogether escaped 

higher grain prices since global prices were also high. 

After May 2008, Afghan-Pakistani price gaps decreased as domestic prices 

in Afghanistan fell faster than those in Pakistan. In September 2009, USDA 

forecast a sharp rebound in Afghanistan’s 2009/10 wheat crop to a record 

4.1 million metric tons (USDA, 2009c). Yield is forecast to rise to 1.64 

metric tons per hectare in 2009/10, a 74-percent increase over the previous 
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year. Excellent growing conditions, allowing area expansion and higher crop 

yields, should benefi t Afghanistan’s wheat farmers, and lower grain prices 

should substantially improve the welfare of Afghanistan’s consumers relative 

to the previous year. However, despite the favorable shortrun outlook, the 

basic factors that put Afghanistan at risk—susceptibility to weather-induced 

agricultural supply shocks and Pakistani trade restrictions—remain in force. 

These risks may be ameliorated through improvements in infrastructure that 

could provide Afghan consumers with lower cost access to wheat and fl our. 

Currently, Uzbekistan’s railway network, which stops at the border town of 

Hairatan, does not enter into Afghan territory. Consequently, trains carrying 

Central Asian wheat and fl our must be offl oaded onto trucks, causing delays 

and increasing costs. If completed, the 75-km planned railway connecting 

Hairatan, Uzbekistan, and Mazar-e-Sharif in northern Afghanistan could 

reduce bottlenecks at the border (ADB, 2009). Kazakhstan may also benefi t 

from the planned railway, since its fl our exports are transshipped through 

Uzbekistan before reaching Afghanistan. However, given the security situation in Afghanistan, railways may be particularly vulnerable, implying high 

maintenance costs and transport disruptions.

Road transit corridors currently under construction include a major national 

highway in the north from Kishim to Faizabad. This highway, which is 70 

percent complete, is likely to improve accessibility to the remote area of 

Faizabad. When completed, the Kandahar-Bikah road in the south, which 

would increase access to the border crossing at Spin Boldak (USAID, 

2009b), may enhance Afghan-Pakistani commerce and trade volumes. A 

factor that could enhance Central Asia’s share of the Afghan import market is 

improved connectivity between Mazar-e-Sharif and Hirat.
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Conclusions

Wheat is Afghanistan’s major food staple. Domestic production is highly 

variable, and imports from surrounding countries have a key role in stabilizing food consumption. Afghanistan depends heavily (though not exclusively) on one supplier, Pakistan, for imported wheat and fl our. Pakistan 

has, for the most part, proved a reliable supplier; indeed, Pakistan’s domestic 

policy interventions have helped to subsidize fl our prices in Afghanistan. 

Up through December 2007, wheat and fl our prices in these two countries 

tracked each other reasonably well, and price gaps were relatively small and 

stable. However, Afghanistan’s food supply network broke down in 2008 due 

to a confl uence of events, including shortfalls in both Pakistani and Afghan 

wheat production and Pakistan’s bans on wheat and fl our exports. Consequently, wheat and fl our prices in Afghanistan increased well above those 

in Pakistan. Substantial price hikes were needed to bring increased Kazakh 

fl our shipments through the very ineffi cient transport system from the North. 

Improvements in infrastructure could permit Afghanistan to diversify its 

wheat and fl our imports and supplement domestic production at a lower cost.
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References

Asian Development Bank (ADB) (2009). Environmental Assessment Report: 

Project Number 42533. August.

Chabot, Philippe, and Paul A. Dorosh (2007). “Wheat Markets, Food Aid and 

Food Security in Afghanistan,” Food Policy 32:334–53.

Dorosh, Paul, and Abdul Salam (2006). “Wheat Markets and Price Stabilization in Pakistan: An Analysis of Policy Options.” Pakistan Institute of 

Development Economics (PIDE), PIDE Working Papers 2006:5. 

Government of Afghanistan (2003). National Rural Vulnerability Assessment 

Survey (NRVA). Ministry of Rehabilitation and Rural Development. 

Government of Pakistan, Economic Advisor’s Wing, Finance Division 

(various years). Pakistan Economic Survey. (Background source; not 

cited in text.)

Government of Pakistan, Statistics Division, Federal Bureau of Statistics 

(various issues). Monthly Review of Price Indices.

Global Trade Information Services (2009). World Trade Atlas database. 

(Background source; not cited in text.) 

Hale, Andy D. (2002). Afghanistan Food Aid Impact Assessment. Chemonics 

International Inc., Washington, DC, December.

International Monetary Fund (2009). World Economic Outlook Database. 

April.

Khan, Shamsher (2007). Pakistan Wheat Subsector and Afghan Food Security: A special report by the Famine Early Warning Systems Network 

(FEWS NET), United States Agency for International Development. May. 

Maletta, Hector (2004). “Winters of Discontent.” Afghan Ministry of Agriculture and Animal Husbandry; U.N. Food and Agriculture Organization, Food, Agriculture and Animal Husbandry Information Management 

Policy Unit (MAAH; FAO/FAAHM), January.

Schulte, R.B. (2007). Northern Wheat Trader Survey and Afghan Food Security: A Special Report by the Famine Early Warning Systems Network 

(FEWS NET), United States Agency for International Development. 

August.

Trostle, Ronald (2008). Global Agricultural Supply and Demand: Factors 

Contributing to the Recent Increase in Food Commodity Prices. Outlook 

Report WRS-0801, U.S. Department of Agriculture, Economic Research 

Service. http://www.ers.usda.gov/Publications/WRS0801/

United Nations Food and Agriculture Organization (2009) (FAO). FAOSTAT 

database. Rome.
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U.S. Agency for International Development (USAID) (2009a). Afghanistan 

Country Profi le. October 12. 

U.S. Agency for International Development (2009b). Infrastructure Sector 

Profi le. November 30. 

U.S. Department of Agriculture, Foreign Agricultural Service (2009a). Pakistan Grain and Feed Annual Report 2009, GAIN Report #PK9002. March 

11.

U.S. Department of Agriculture, Economic Research Service (2009b). U.S. 

and Foreign Wheat Prices. Wheat Data: Yearbook Tables. August 21. 

U.S. Department of Agriculture, Foreign Agricultural Service (2009c). USDA 

Production, Supply and Distribution (PS&D) database.

U.S. Department of Agriculture, Foreign Agricultural Service (2009d). 

Afghanistan: Wheat Production Recovers in 2009/10 Season, Commodity 

Intelligence Report. June 10.

U.S. Department of Agriculture, Foreign Agricultural Service (2008a). 

Afghanistan: Severe Drought Causes Major Decline in 2008/09 Wheat 

Production, Commodity Intelligence Report. August 12. 

U.S. Department of Agriculture, Foreign Agricultural Service (2008b). Pakistan Grain and Feed Annual Report 2008, GAIN Report #PK8010, March 

6.

U.S. Department of Agriculture, Foreign Agricultural Service (2007). Pakistan Grain and Feed Backdrop for Current Wheat Shortage 2007, GAIN 

Report PK7034, December 20.

World Bank (2005). The Investment Climate in Afghanistan: Exploiting 

Opportunities in an Uncertain Environment. December.

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(VAM) unit (2009). Price Analysis in Afghanistan, Kabul, Afghanistan.

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Emergency Food Security Assessments. Rome. November.
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Appendix

Data Sources and Uncertainties

There is considerable uncertainty surrounding estimates of population, 

production, consumption, and trade fl ows for Afghanistan. Total population 

estimates are approximations, since large segments of the population fl ow in 

and out of the country, including the seasonal movement of nomadic tribes 

into Pakistan and the large return of refugees in 2002-04, both of which were 

diffi cult to count accurately. 

The Food and Agriculture Organization (FAO) and the World Food 

Programme (WFP) develop crop production estimates for Afghanistan, 

working under adverse conditions of war, rural insecurity, and poor transport infrastructure, while also coping with tight budget and time constraints. 

Government data at the provincial level are limited, and this further increases 

the diffi culties of quantifying crop production for Afghanistan as a whole 

(Chabot and Dorosh, 2007). From 2000 forward, Afghan wheat production 

estimates from FAO are strongly correlated with USDA Production, Supply 

and Distribution (PS&D) data. This report uses PS&D data, since this source 

provides data through 2008, as well as estimates for 2009.

Estimates of trade fl ows are uncertain—reliable independent customs data on 

Afghanistan’s wheat imports are not available (Chabot and Dorosh, 2007), 

and there is a great deal of unoffi cial cross-border trade. The USDA PS&D 

online database may provide the best estimates of wheat and fl our imports. 

Based on Foreign Agricultural Service (FAS) Global Agriculture Information Network (GAIN) reports as well as conversations with FAS Agricultural 

Specialists from Islamabad, market sources are utilized to account for offi cial 

and unoffi cial trade in the USDA PS&D import numbers for wheat and fl our. 

Although trade fi gures are uncertain, various sources such as FAS GAINS 

reports, United States Agency for International Development (USAID), the 

United Nations World Food Programme, and the World Trade Atlas agree that 

Pakistan is the dominant supplier of wheat (primarily in the form of fl our) to 

Afghanistan. Kazakhstan ranks a distant second in most years, but revised 

trade data indicate a signifi cant increase in 2008/09 Kazakh wheat and fl our 

exports to Afghanistan that moderated the drop in Afghan consumption. 

This report uses price data collected by the World Food Programme (WFP) 

in the six major cities of Afghanistan: Kabul (the capital), Kandahar in the 

southwest, Hirat in the west, Mazar-e-Sharif in the northern province of 

Balkh, Fayzabad in Badakhshan province in the northeast, and Jalalabad in 

the eastern province of Nangarhar. WFP price data are useful for evaluating 

the affordability of food for low-income segments of the population. By 

design, the data series represents the lowest priced food varieties available 

in urban bazaars. Consequently, the average retail prices in these cities are 

likely to be higher than the WFP price series. Nevertheless, the data collection method is straightforward and consistent: WFP data collectors identify 

the minimum price after recording a sample of prices in different stalls of 

each bazaar (Maletta, 2004). No data exist on producer prices in Afghanistan, and the WFP prices are likely to overstate farm producer incentives.