Afghan Wheat and Flour
Market
Author: Nisar Ahmad Hassan
Afghanistan Investment Support Agency
Acknowledgments:
Afghan Wheat and Flour Market
The completion of this research paper would have not been possible had it not been for the
constant and unconditional support and guidance of the following people:
CEO of Afghanistan Investment Support Agency, Mr. Wafiullah Iftikhar for his unconditional
support to the Research Planning & Policy Directorate.
Shah Faisal Marjan, Director Research Planning & Policy for constant guidance and inputs
throughout this paper. Ahmad Nawaz, Siddiqullah Mujaddidi and Dr. Shamsulhaq Stanikzai,
Managers at the Research Planning & Policy Directorate.
I owe a big part of this research paper to the Research Planning & Policy Directorate’s
colleagues who not only helped with the data collection, but throughout the writing of this paper.
Specially Dr. Fazal Rabi Ahmadzai, Mohammad Hanif Rustam, Hikmatullah Mahmodi, Mirwais
Ahmadzai, Waheedullah Azizi and Sayed Mahboobullah Rabbani.
All the respondents who patiently answered the questions and giving their precious insight
regarding the situation of wheat and flour market of Afghanistan. All the friends and well
wishers inside AISA and outside, who kept on providing me with their ideas and information
regarding this paper and supported me.
I am forever greatly indebted to each one of the above people.
2
The views expressed in this paper are those of the author and do not necessarily
reflect the official position of AISA (Afghanistan Investment Support Agency) any
Afghan Wheat and Flour Market
content in this paper to be reproduced with the consent of AISA.
3
Contents
EXECUTIVE SUMMERY ..................................................................................................................... 5
INTRODUCTION................................................................................................................................. 6
RESEARCH METHODOLOGY AND APPROACH ............................................................................... 7
CHAPTER 1 AFGHAN WHEAT MARKET ........................................................................................ 8
1.1 AFGHANISTAN AS AN AGRICULTURE COUNTRY ................................................................... 9
1.2 AFGHAN WHEAT MARKET .................................................................................................... 10
1.3 THE WHEAT PROCESS: CULTIVATION TO HARVESTING ..................................................... 12
1.4 AFGHAN MILLING .................................................................................................................. 13
1.5 MAIN MILLS ........................................................................................................................... 14
CHAPTER 2 REGIONAL OVERVIEW ............................................................................................. 15
2.1 GEO-ECONOMICAL OVERVIEW OF CENTRAL ASIAN REGION ............................................ 16
2.2 REGIONAL WHEAT PRODUCERS ........................................................................................... 16
2.3 REGIONAL WHEAT TRADE ROUTES ..................................................................................... 17
CHAPTER 3 MARKET ANALYSIS ................................................................................................. 18
3.1 MARKET ANALYSIS ............................................................................................................... 19
3.2 DEMAND AND SUPPLY ........................................................................................................... 20
3.3 PRODUCTION .................................................................................................................. 20
3.4 DEMAND ......................................................................................................................... 21
3.5 SHORTFALL AND IMPORTS ............................................................................................ 21
3.6 VALUE OF IMPORTED WHEAT....................................................................................... 22
3.7 SWOT ANALYSIS .................................................................................................................. 23
3.8 INVESTMENT OPPORTUNITIES ............................................................................................... 25
Afghan Wheat and Flour Market
CHAPTER 4 RECOMMENDATIONS & CONCLUSION .................................................................... 27
4
4.1 RECOMMENDATIONS.............................................................................................................. 28
4.2 CONCLUSION .......................................................................................................................... 30
REFERENCES ................................................................................................................................. 31
Executive Summery
Wheat is the main crop and staple food of Afghanistan with annual per capita consumption of
wheat and its products larger than any other country in the region. However, it is also a fact that
Afghanistan is one of the biggest wheat importers of the world. A very small portion of
domestically produced wheat is sold in the market; most of it is consumed for the household
purposes by farmers themselves or shared with the landlord as part of deal usually in practice in
Afghanistan.
Normally wheat grain is traded heavily around the globe, mainly because of the restrictive
measure on wheat flour transactions and taxes. However, in Afghanistan, where milling is the
largest official agro industry, wheat flour is imported. Afghanistan stands in sharp contrast to the
international norm in its ratio of wheat grain to wheat flour imports.
The research shows that milling industry in Afghanistan, in the past few decades, has dilapidated
to the point that there are hardly any proper mills, apart from few that could be counted on
fingers. Small-scale Asiabs and Zirandas, (small scale water mills) that run on water, diesel, and
electricity coup with the majority of the wheat needed in the country. These small-scaled mills
can make 1-3 tons of flour a day and not more. For household consumption by farmers and other
living in the rural areas of the country, the hand revolving stone grinding method is still in
practice.
Afghan Wheat and Flour Market
Based on official statistics acquired, the demand for wheat in Afghanistan last year was 6.6
million tons, while the production only 5.1 million tons. The remaining 1.5 million ton was
imported from neighboring countries, mainly Pakistan and Kazakhstan. There are several reasons
for this shortfall in the local production. Our study highlights some of the main reasons which
include lack of water, drought in the last two decades, improper irrigation system, lack of proper
distribution channel, lack or negligence of government, electricity problems, etc.
5
The paper recommends few key points in order to deal with the current situation of wheat and
flour industry. Government must first of all make sure farmers are provided with proper and best
quality seeds, and fertilizers are properly tested before they are provided to farmers and that too
at discounted prices. As electricity is expensive, subsidy on electricity should be provided to the
mills. Additionally, government policies must provide relief to farmers and wheat and flour
industry as a whole by giving importance to this industry. Import of grains to the country should
be monitored so that illegal entry of grains is stopped and made sure wheat grains are provided
on time. As water shortage is one of the main concerns, construction of Khawrin Dams “mud
dams” is an easy and cost effective method of water storage. Lastly, Afghanistan is one of the
less dense countries; better management of the unused land must be made sure.
Investment opportunities exist in building storage facilities, deep wells, building new and
modern mills, mechanizing the wheat process from cultivation to harvesting and establishing
proper research centers for better seed and wheat verities.
Introduction
Wheat is one of the oldest grains, used for the household usage for a long time. Once considered
a religious symbol, it was part of sacred rituals in many cultures. Originally, wheat grain was
consumed raw as it was full of nutrition. Also, those people did not have the means or
knowledge of using it in other form than raw. They would store wheat grains and keep it dried,
and in winters would consume the raw grains as a mean of food.
The consumption and cultivation of wheat is more than any other grain in the world and
cultivated on more land than other vegetables and grains. Today, the largest commercial
producers of wheat include the Russian Federation, the United States, China, India, France and
Canada. It is estimated that presently approximately one-third of the world's people depend upon
wheat for nourishment.
Wheat can be grown on both irrigated lands as well as rain fed lands. This means water is very
important for the cultivation of wheat around the world. There two main seasons for wheat
cultivation; spring and autumn.
There are several wheat verities around the world, the most common ones are: hard red winter,
hard red spring, soft red winter, durum (hard) and Common white wheat. The hard wheat(s)
grown around the world are the ones with the most amount of Gluten in them; they are the
wheat(s) that are generally used for making bread and all purpose flour. The soft wheat(s) are
mostly used in the bakeries for making pastries, cakes, muffins, biscuits and other bakery related
products.
Wheat plants grow several side shoots called tillers from a crown which is below the ground
level. Each one of these tillers grows an elongated stem which then grows and bears a flowering
head at its top. The length of these tillers vary greatly between different wheat types, some of the
types are short (less than 20cm) while others are extremely tall (over 1m). Modern wheat is
generally from 80cm to 1m tall in length.
Afghan Wheat and Flour Market
Wheat Kernel is the main seed or grain of wheat that is the beginning part of the wheat process
as seed or the end product as grain. A Kernel is divided into three main parts Barn, Endosperm
and Germ. Most of wheat’s important nutrients are located in the bran and the germ. The outer
layer of Kernel that can be also consumed, but often removed at the time of flouring the wheat, is
called Husk. Husk can be consumed, but must be removed before the Kernel can be consumed.
6
Wheat farmers have to face different kinds of wheat disease. Some are Bacterial; others are
fungal while there are viral diseases as well. But the most devastating of the wheat diseases is
rust diseases. There are three main types of rust diseases; Stem Rust, Yellow Rust and Leaf Rust.
This paper contains different chapters that in detail discus several aspects of wheat and flour
industry of Afghanistan. An overview of Afghan wheat market is followed by regional overview,
and market analysis. At the end conclusion is derived with some recommendations to boost the
industry.
Research methodology and Approach:
For the preparation of this report Kabul and Herat provinces are surveyed based on their regional
power centers, economic, political and social importance but also due to lack of research on the
east and west.
This survey draws upon approximately 30 interviews conducted in Kabul and Herat province
from November through January 2014. The majority of these were structured interviews with
key informants including;
1. Farmers
2. Mills, Traders, Zranda (small mills)
Data collection and surveys took place with the help of primary and secondary data.
For the aim of primary data, both qualitative as well as quantitative methods were put to service
by not simply questionnaires being replied, but one on one interview also took place.
Afghan Wheat and Flour Market
A wide array of secondary data and analysis was drawn upon, including official statistics, news
articles, field reports, historical materials and grey literature. Utilizing the already available data
was observed and taken advantage of. It is worth mentioning that given the type of the research it
was, main focus was on secondary data.
7
Afghan Wheat and Flour Market
Chapter 1
Afghanistan Wheat Market
8
Afghanistan as an Agriculture Country
Afghanistan is a landlocked country located in the central Asia. It shares borders with different
countries; in north Afghanistan is bordered with Turkmenistan with a border of 744km,
Uzbekistan (137km), and Tajikistan with a border of 1206 kilometers. The country is bordered in
the north-east with China with a border of 83 kilometers. Afghanistan shares its biggest border
with Pakistan in the east and south with a length of 2430 combined. On the west Afghanistan is
bordered with Iran (936km).
Primarily depending on agriculture, Afghanistan has total land area of 65223 thousand hectares.
Majority of the country depends on agriculture and in order to fulfill its agricultural needs,
Afghanistan has to heavily rely on neighbors for constant supply of grains. The land distribution
of Afghanistan can be observed in the table below. Out of 65223 thousand hectares only 9610
thousand hectares is dedicated for agriculture.
Thousand Hectares
Land Use
2011-12
Afghan Wheat and Flour Market
2013-14
9
2012-13
Total land area (1+2+3)
65223
65223
65223
1: Permanent pasture
30000
30000
30000
2: All other land
25613
25613
25613
3: Agricultural area (a+b+c+d)
9610
9610
9610
a - Forests and woodland
1700
1700
1700
b-Fallow land
4229
4337
4710
c-Irrigated crops area
2092
2072
2044
d- Cultivated rain fed area
1524
1501
1156
Permanent crops
125
120
119
Data: CSO (Central Statistics Organization)
Permanent pastures occupy roughly half of the total land, while other land makes another huge
chunk of the total land area of the country. The figure below shows 45% of total land dedicated
to agriculture is follow. This 45% cannot be used for agricultural activities. The remaining 55%
is the land that is used for different kinds of cultivations. Forests and woodlands make 18% of
the remaining 55%.
Agricultural Area
16%
45%
21%
RainFed Area
Irrigated Crops Area
Forests and Woodland
Fallow Land
18%
Data: CSO (Central Statistics Organization)
Afghan Wheat Market
Wheat is the main crop and staple food of Afghanistan with consumption of wheat and its
products larger than any other country in the region.
Afghan Wheat and Flour Market
Per Capita Wheat Consumption
10
Countries
Per Capita Wheat Consumption KG/Year
Afghanistan
170
Pakistan
106
Iran
160
Uzbekistan
164
Asia Regions
66
Source: FAOSTAT; for Afghanistan NRVA 2005
However, it is also a fact that Afghanistan is one of the biggest wheat importers of the world
along with Uzbekistan and Iraq. A very small portion of domestically produced wheat is sold in
the market; most of it is consumed for the household purposes by farmers themselves or shared
with the landlord as part of deal usually in practice in Afghanistan.
Additionally, demand for local wheat is limited due to the small number of industrial mills. Most
of the flour produced in Afghanistan is produced by the small mills located in rural and urban
areas, which produces low-quality flour.
It is quite evident in Afghanistan that majority of wheat sellers sell not wheat, rather wheat flour.
This is mainly due to the insufficient amount of wheat grown in the country. The provinces of
Mazar-e-Sharif and Herat hardly have any contribution from the locally grown wheat, or very
little.
Another main hardship in the functioning of the wheat markets in Afghanistan is the non
standard state of storage infrastructure, especially for wholesalers where wheat bags are stored
under a shed and is not taken proper care of it. Consequently the wheat at hand is far less than
the losses during the storage process. Only a few traders or sellers have the financial means and
storage capacity to keep wheat for more than just a couple of months.
Afghanistan as a nation has an unfortunate ratio of wheat imported compared to flour imported.
More than 70% of the wheat related imports are flour rather than solid wheat. Afghanistan relies
heavily on the processed good rather than the raw. One of the main reasons for this is the non
availability of mills in the country or very limited.
Pakistani flour is widely consumed due to the fact that Afghan consumers like the quality of its
products. Kazakhstan is the largest exporter of wheat in the region and in recent years a
dominant flour exporter worldwide, is the other major supplier, although it does not share a
border with Afghanistan, it comes from different routes and means. Kazakh wheat and flour
comes to Afghanistan through Tajikistan, Uzbekistan, and Turkmenistan.
Afghan Wheat and Flour Market
During the growing period of wheat there is limited rainfall in Afghanistan, this lead to formers
relying mainly on the irrigation process. The main water supply for the country is the annual
winter snows that make the biggest chunk of the water run through the agriculture fields. The
heavily relying on the snow melted water determines the crop of wheat and any other crop in the
country.
11
Looking back at the bright days of afghan wheat market, we see the period in the late 1970s and
early 1980 when the country was producing sufficient amount of wheat. This production
remained stable till late 1980s; unfortunately the arrival of the 1990s decade and the internal
conflicts brought with it the bad news of reduced and deteriorated state of crops, mainly wheat.
The wheat production, like the country’s situation, stabled in the post Taliban era. The domestic
political and social conditions had a far better impact on the wheat production as the harvest and
production started growing.
The Wheat Process: Cultivation to Harvesting
In Afghanistan wheat is cultivated in spring and fall. The amount of labor hours needed for
ploughing is 5 to 6 hours and cost of labor for ploughing the land is 300 to 500 Afghanis. Seed
required for one hectare is 175 kilograms and per kilogram cost of seed is 28 – 35 Afghanis.
Land is irrigated 5 to 7 times per season and fertilizer used per hectare is one sack of urea and
one sack of DAP (Dai Ammonium Phosphate).
Wheat crop must be saved from the rusts and other diseases, for this purpose, pesticides are used.
Keeping the need of the pesticides in mind the amount is used within a season. Normally 5 to 15
sacks of pesticides are used in a hectare. It takes 5 to 10 men to cut the wheat once it is done.
Since modern machinery is still not used much, cutting is mostly done by hands or threshers. The
cut wheat which costs around 18 Afghanis per kilogram is sold for 20 to 21 Afghanis.
The table below shows the labor, seed, fertilizer, pesticides and other needs from cultivation of
wheat seed till harvesting.
Labor for
Seed
Ploughing
Quantity 5
175 KG
per
hectare
Fertilizers
Pesticides
End
Labor for
Product
Harvesting
Cost
End
Product
Sale
1
sack
Urea
5
-15
5 – 10
sacks
1
1
Kilogram Kilogram
12000 –
7300
20000
Afghanis
Afghanis
18
Afghanis
1
sack
DAP
Afghan Wheat and Flour Market
Urea=1300
12
Cost
300-500
Afghanis
per Person
Afghanis
28 – 35
Afghanis
DAP=2600
20 – 21
Afghanis
Afghanis
Source: Survey Data
Afghan Milling
Normally wheat grain is traded heavily around the globe, mainly because of the restrictive
measure on wheat flour transactions and taxes. However, in Afghanistan, where Milling is the
largest official agro industry, wheat is not enough to fulfill the country’s demand and so instead
inst
of importing wheat grains to run the mills properly, wheat flour is imported. Afghanistan stands
in sharp contrast to the international norm in its ratio of wheat grain to wheat flour imports.
The table below shows the amount of wheat grain ratio to th
thee amount of wheat flour imported
from Pakistan. This clearly shows that 74% of imported wheat that enters to the country is in the
processed form. While wheat grains only make up to 26% of the total imports from Pakistan.
Composition of Afghan wheat imports (2009/10 - 2010/11 average)
Imported Wheat
26%
Wheat Grains
74%
Wheat Flour
Afghan Wheat and Flour Market
Data: International Grain Council
13
Milling industry in Afghanistan, in the past few decades, has dilapidat
dilapidated
ed to the point that there
are hardly any proper mills, apart from a few that could be counted on fingers. Small-scale
Small
Asiabs and Zirandas, (Small Scale water mills) that run on water, diesel, and electricity coup
with the majority of the wheat needed in tthe country. These small-scaled
scaled mills can make
anywhere from 1-33 tons of flour a day and not more. For household consumption by farmers and
other living in the rural areas of the country, the hand revolving stone grinding method is still in
practice.
Challenges
nges faced by Afghan mill owners vary from unsustainable flow of wheat produced within
the country to flour imported instead of grains. The imported wheat grain that is imported in low
quantity also is not sure to reach as neighboring countries face harves
harvest,
t, climatic and other issues.
Although the Afghan Government several times set tariffs on flour and wheat imports to support
domestic production and stop the milling industry go into further decline, the efforts have not
brought any substantial improvements as smuggling can bring a dent in the industry.
Main Mills
There are about five public and eight commercial mills working in Afghanistan that can capture
only a small fraction of the flour production market. Some of the main mills and silos in
Afghanistan that are producing flour for domestic use are listed below.
No.
Mill
Location
Capacity
Storage
Capacity
1
Kabul Silo
Kabul
150 MT/day
50000 MT
2
3
4
5
6
Afghan Wheat and Flour Market
7
14
8
9
Kabul
Soorat zada
Flour mill
Baghlan
Silo
Kunduz
Flour Mill
Mazar Silo
Jamal Flour
Mill
Sakhaw at
Mill
Herat Silo
Arya
Mills
Flour
Industrial Area 160 MT/day
on the Jalalabad
road
3500 MT
Baghlan
80–120MT/day
40,000MT
Kunduz
100 MT/day
Mazar-e-Sharif
60MT/day
40,000 MT
Mazar-e-Sharif
50MT/day
2,000 MT grains
700 MT flour
Kabul
60MT/day
2000MT
Herat
The
milling 20,000MT
machine is yet
to be installed.
Herat
160MT/day
80,000MT
Afghan Wheat and Flour Market
Chapter 2
Regional Overview
15
Geo-Economical overview of Central Asian Region
Central Asia is a region that is not a densely populated area. With the exception of Pakistan that
is largely populated, other countries are populated with few regions being populated, others less
populated.
Afghanistan has population of around 30 million people, good enough to make it the secondmost populated country in the region, followed by Uzbekistan, with about 29 million people
inhabitants. Kazakhstan, Tajikistan, Turkmenistan, and Kyrgyzstan, have small populations
when compared to the three mentioned countries.
Kazakhstan is the wealthiest country in the region with per-capita gross national product (GNP)
of more than $10,000 as of 2009. Uzbekistan and Pakistan have much lower GNPs of $2,910 and
$2,680, respectively. These two countries are classified as lower-middle income economies.
Kyrgyzstan, Tajikistan, and Afghanistan are all low-income countries, according to World Bank
classifications.
Regional Wheat Producers
Wheat is grown in all the countries under different conditions. Some countries have rain, for
instance Pakistan, so the process is in the large scale. A country like Afghanistan, with little rain,
has low production. This, keeping in mind the poor procedures and the lack of government
support.
Majority of the wheat grown in the Kazakhstan is rain-fed spring wheat. Because of the dry
climate, northern Kazakhstan produces good quality hard wheat; however, the constant droughts
that happen cause low yield. The less rain in summer is main cause of low yields in the country
and the winter harvest adds very little.
In Pakistan, Punjab typically accounts for majority of domestic output. Sindh province also
produces a significant quantity of wheat. Wheat is mostly grown on irrigated land, with rain-fed
wheat accounting for less than one-fifth of total production.
Afghan Wheat and Flour Market
The northeast of Uzbekistan, northern regions of Tajikistan, western and southern areas of
Kyrgyzstan, Amu and Syr Darya River areas in south and east of Uzbekistan and southern
Tajikistan are areas that wheat has good production in.
16
In Afghanistan wheat is produced mainly in the north. The provinces of Baghlan, Takhar, and
Kunduz tend to have the largest wheat surpluses because of the availability of water for
irrigation. In good times of rainfall, provinces of Samangan, Sar-e Pul, Faryab, Badghis, and
Herat, where the wheat crop is more rain-fed, also has productions. In Afghanistan and
Tajikistan, where agriculture is not modernized compared to other countries and farmers do not
have access to improved methods, the consequences of inadequate moisture can be severe.
Regional Wheat Trade Routes
Kazakhstan is the biggest wheat exporter of the region as it exports to surrounding regions.
Outside the neighboring countries, Afghanistan is a major destination for Kazakh wheat.
Kazakhstan exports wheat to Iran as well. And though Kazakhstan’s wheat buyers vary, it mainly
exports to neighboring Central Asian countries.
As Afghanistan, Kyrgyzstan and Tajikistan are mountainous, the trade routes are not easy to pass
or establish. Being land lock countries, these three countries face many challenges in having
access to the rest of the world, an access that could have been very easy, had they have sea
shores. The nearest sea ports are Bandar Abbas in Iran and Karachi in Pakistan on the Arabian
Sea. Political tension among majority of these countries and tension in the borders, cause more
troubles in finding proper trade routes or making easy trade happen.
Wheat is transported from Kazakhstan to southern Central Asia, in Tajikistan and Afghanistan in
particular. Wheat is transported southward by rail, through Astana and Karaganda to Shymkent
in southern Kazakhstan, near the Kyrgyz border and then to Tashkent, Uzbekistan or westward to
the Caspian Sea, Ukraine, Russia, or the Black Sea. From the south of Kazakhstan, wheat can
also be shipped eastward to China, through Druzhba, and to Kyrgyzstan in the direction of
Bishkek. This wheat travels to Mazar-e Sharif, Afghanistan through Hairatan, about 90 km south
of Mazar-e-Sharif, from Uzbekistan.
The secondary route that brings wheat is from Turkmenistan, a rail way, is through Towraghondi
to Herat. The wheat is not from Turkmenistan, but it is just a route. That rail line functions well
and there are numerous storage facilities in Towraghondi where they are used to store wheat.
Afghan Wheat and Flour Market
Pakistan has a large export capacity, when harvest is good. It traditionally exports to
Afghanistan, as well as to the Middle East, East Africa, and East Asia. Wheat flour enters
Afghanistan through two main points from Pakistan. The first one is through Chaman from
Quetta to Kandahar and Spin Boldak in South of Afghanistan. The second point is from
Peshawar to Kabul through Torkham, on the Pakistani side, and Jalalabad in Afghanistan. It is
the mills working in the border side of Pakistan that make sure this flow is continued through
Torkham.
17
Agents of Afghan importers that are based in Uzbekistan, Kazakhstan, and Pakistan, work to
search market information and identify supply sources, negotiate transactions, and organize
means for transportation and monitoring it.
When market need is analyzed, these agents of importers put order on behalf of the importers to
the suppliers, who then make sure that order is met and transportation means are then found. The
time between an order and delivery of the order vary, but are relatively quick and well thought
off, however, the process through Tajikistan is lengthier.
Afghan Wheat and Flour Market
Chapter 3
Market Analysis
18
Market Analysis
Wheat is the biggest cultivated cereal and overall largest cultivated agricultural product. In 2014,
wheat was cultivated on 2,552,922 hectares.
Cultivated Land under Cereal (Thousand Hectares)
3000
2552 2512
2500
2000
1500
2014
2013
1000
500
205
205
278
280
142
141
0
Wheat
Rice
Barley
Maize
Data: CSO (Central Statistic Organization)
Afghan Wheat and Flour Market
For centuries wheat is considered the primary source of food and nourishment in Afghanistan.
The crop went through good and bad times in recent history. The consumption of wheat is larger
than any other crop. The era of the mid 1980s was the brightest in the country where wheat was
produced in sufficient quantity to suffice the local need, however, during the social and political
turmoil of the 1990s and constant droughts destroyed much of the crops.
19
In the year 2014, the production of wheat was 5.17 million tons with the biggest contribution
coming from Nangarhar, Baghlan, Ghazni, Takhar, Badakhshan, Kunduz, Balkh, Helmand and
Herat provinces. Out of the produced wheat, 79% was used for food. The remaining 21% was
mostly loses with only 6% used as a seed and stored.
Wheat Grains Destribution
15%
%
6%
Seed Provision
Food Use
Losses
79%
Data: CSO (Central Statistic Organization)
Demand and Supply
Production:
Wheat grown within Afghanistan showed great growth in the year 2012
2012-2013
2013 from the previous
year. The growth was close to 1.7 million tons. However, the growth in the next year compared
to 2012-2013
2013 year was less than 200,000 tons. The ffigure
igure below shows the production levels in
the last three years.
Wheat Produced within Afghanistan (Million Tons)
6
5.16
16
5.05
5
Afghan Wheat and Flour Market
4
20
3.38
2013-2014
2014
3
2012-2013
2013
2
2011-2012
2012
1
0
Wheat Production
Data: CSO (Central Statistic Organization)
Demand:
Demand for wheat increased in Afghanistan in the last three years. The demand in 2011-2012
2011
year was 4 million tons, next year it increased to 5.9 million tons. Last year the demand was 6.6
million tons. This demand
mand is often met with the help of imported wheat from neighboring
countries. The figure below shows the demand of wheat in the last three years in Afghanistan.
Wheat Demand in Afghanistan (Million Tons)
4.07
Wheat Demand
2011-2012
5.91
2012-2013
6.64
0
1
2
3
4
5
6
2013-2014
7
Data: CSO (Central Statistic Organization)
Afghan Wheat and Flour Market
Shortfall and Imports:
21
The annual shortfall for wheat in Afghanistan in the year 2014 was close to 1.5 million tons. In
spitee of being an agricultural country, Afghanistan witnesses shortfall each year when it comes to
fulfilling the local demand. Since the country still has to shrug off the after effects of droughts,
political turmoil and proper plan to fulfill the demand, it has to import wheat.
Afghanistan imports wheat from its neighboring countries namely Pakistan and Kazakhstan.
Although Kazakhstan does not share a border with Afghanistan, the wheat comes through
Uzbekistan and Tajikistan. Iran also contributes in wheat sh
shortfall
ortfall as other neighboring countries.
But the main countries that export wheat to Afghanistan are the aforementioned two countries.
The figure below shows the annual shortfall in the last three years and wheat imported by
Afghanistan. The 2013-2014
2014 year had shortfall of around 1.5 million tons, the year before had
shortfall of 0.86 million tons. The year 2011
2011-2012
2012 had wheat shortfall of 0.68 million tons.
Demand, Local Production, Shortfall (Million Tons)
6.64
7
5.91
6
5.16
5.05
5
4
4.07
Demand
3.38
3
Local Production
2
Shortfall
1.47
1
0.866
0.684
0
2013 - 2014
2012 - 2013
2011 - 2012
Data: CSO (Central Statistic Organization)
Value of Imported Wheat:
The wheat imported by Afghanistan from neighboring countries costs in hundreds of millions of
dollars. The wheat imported last year valued at 479 million dollars. The wheat imported in 2012
-2013
2013 cost close to 267 million dollars. The huge increase in the imported wheat’s expenditures
of both years is due to the increase in the demand and little growth in local productions between
the two years. The figure below shows value of imported wheat in millions.
479
500
Afghan Wheat and Flour Market
400
22
266
300
200
220
2013-2014
2012-2013
2011-2012
100
0
Value of Imported Wheat
Data: CSO (Central Statistic Organization)
Organization
SWOT Analysis
Strength
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The biggest strength, when it comes to wheat is the fact that it is not only the major crop
of the world, but in Afghanistan up to 80% of crops comprise of wheat.
Afghanistan is one of the less dense countries in the world, this mean more land available
for harvesting wheat.
The climate of Afghanistan is suitable for wheat harvesting.
Afghanistan has all four seasons, as wheat is harvested in two seasons, in Afghanistan
farmers harvest wheat in both spring and fall seasons.
It is the staple food of the country so it is always an important agricultural output of
Afghanistan.
Without any scientific researches or engineering facilities, the process is running in the
country.
As agriculture is the main industry (sector) of Afghanistan, harvesting comes naturally to
the people of this country.
Weakness
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Afghan Wheat and Flour Market
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The decades long war beginning in the 1970s had a profound effect on the agricultural
activities in the country.
Constant droughts that Afghanistan had to suffer in the last two decades dented the wheat
harvesting and other crops.
Lack of proper irrigation system has constantly posed challenges for the harvest of wheat.
Majority of mills present in the country had to endure the political hardships and are in
dire situation.
The milling process in the country is not modern. Few mills that have acquired the
modern technologies in the post-Taliban period are the only ones that have the modern
technologies.
The equipment used in most of the mills is not standard or not working properly.
Afghanistan has to majorly rely on the imported wheat from neighboring countries.
The lack of proper chain for importing wheat from neighboring countries causes
hardships for the milling process on daily basis.
Opportunity
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The major opportunity lies in the form of flour mills that exist in the country. In spite of
wars and internal conflicts most of the mills are still running.
With a little care from the government, the milling industry can stand on its feet.
The supply chain of the wheat can be restored, as once; in the 1980s the industry had
proper supply chain.
With the proper supply chain infrastructure, the problem of supplying wheat to the mills
in time can be resolved.
A proper distribution channel must be introduced.
The importance of imported wheat can never be neglected, while it does affect the sector
inside the country, for the smooth running of the mills these imported goods must be
properly taxed.
With proper training, a new breed of professionals can take over the industry.
Threats
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Afghan Wheat and Flour Market
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The lack of interest from the government is a major threat to the wheat industry.
The increased level of taxes by Pakistan on their exports cause major loss in acquiring
adequate amount of wheat on time, importers not able to pay, try to import illegally.
Electricity is another major issue in the country. The electricity in the country is mostly
brought from neighboring countries and supply of this electricity to the mills properly in
order to run them properly has not occurred till now.
The electricity that reaches these mills is far too expensive and hard to cover the costs.
Bribe is another major issue as the imported wheat is not only taxed, but bride to the
authorities to have a safe transit to the desired destination is another issue.
Security concern is another main threat to the sector.
Rust diseases are another concern for wheat crops in Afghanistan as Yellow rust disease
is a common and damaging disease in Afghanistan.
Investment Opportunities
Afghan Wheat and Flour Market
Wheat and flour sector of Afghanistan is in dire situation, there are massive investment
opportunities, but government has to play an important role in making sure the investment is
made in proper place. Some of the main investment opportunities are as following:
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1. Fertilizers: fertilizers used to increase the outcome and improve quality of wheat in
Afghanistan are increasingly imported. These fertilizers could be produced within
Afghanistan given proper industry is established. This will not only improve the
economic condition of the country by providing more job opportunities, but will stand the
wheat sector by providing cheap fertilizers made specially keeping the geo-agriculture
environment of the country.
2. Seeds: investment in production of best quality seed in Afghanistan is much needed. By
establishing best quality seed production firms, Afghanistan will not have to rely on
imported seeds. Along with production of seed, research must be done on producing best
quality seed. Genetically modified seeds are experimented with around the world. These
seeds could be produced and experimented with within the country for better and bigger
outcome of wheat.
3. Mechanizing the wheat process: currently the wheat cultivation and harvesting process
is the same old hand used method. This method should be modernized. Bringing new and
advance machinery for ploughing the soil is needed. Seeding the earth could be better and
faster by bringing the modern machinery. It is not only effective, but less time consuming
as well. Further, harvesting process could be much faster by relying on modern
machinery. The investment opportunity is in importing these machines and
manufacturing them within the country.
4. More Mills: Afghanistan currently heavily relies on grinding wheat through water mills,
stone grinding and small mills. There are mills but with the exception of a few newly
build, majority of them are partly damaged. Not only these mills could be put back to
proper work, but also building new mills would result in more productivity. Privatizing
mills is another option. Government could play an important role in building these mills
or attracting investors to invest in the current on new mills.
5. Modernizing Mills: the mills currently working in Afghanistan are mostly run by
outdated or old technologies. There are newly built mills in Kabul as well as other
prominent provinces that have acquired the modern technologies. But milling industry as
a whole needs a facelift in the form of bringing in new and modern technologies. These
new and modern technologies will result in much bigger productivity.
6. Irrigation System: irrigated wheat makes majority of the wheat produced within
Afghanistan. But the irrigation system as a whole is dented due to not only political
upheaval, but partly due to the old methods of irrigation system. As previously explained
new dams are needed to water the wheat grown within the country. Water storage is
another investment opportunity that could be very productive. These water storage dams
could be in the form of properly built dams as well as Khawrin Dams. Apart from dams,
water from mountains of Afghanistan goes wasted or to other countries. Building canals
that could be turned to provinces with lower wheat outcome could turn this water back.
Afghan Wheat and Flour Market
These canals could provide the needed water to the less productive provinces and wheat
outcome could be increased.
7. Deep Wells: deep wells could be created in order to extract the water running meters
down the earth. These wells would need electricity to run and extract water in large
quantity, but dams could provide not only water to wheat field, but produce electricity
too.
8. Storage Facilities: storage facilities are another major investment opportunity. Storage
facilities could be found in the border near Herat province that stores wheat and flour that
enters the country from neighboring countries. Same storage facilities could be built in
the other border areas as well. Storage facilities with proper wheat and flour storing
capacity are needed with country at every stop. These storage facilities must be equipped
with modern technologies and machinery in order to store wheat and flour for the longest
time. This wheat and flour could be later on used when famine occurs or when mills need
to store wheat or flour before grinding and distributing to the market.
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Afghan Wheat and Flour Market
Chapter 4
Recommendations
&
Conclusion
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Recommendations
As an agriculture economy, Afghanistan relies heavily on its crops. Wheat being the main crop
of the country needs more attention in order to cut the deficit of the country and stop the imports
as much as possible.
Given wheat is important to the people of Afghanistan for daily nutrition, early warning should
be provided for the importers. They should be aware of how much wheat is needed. It is a
common practice that wheat is imported more than required, and since the quality of imported
wheat is better than the local wheat, appreciation for the imported wheat is bigger. This puts the
local wheat production and use in turmoil. A proper monitoring on the borders will determine the
adequate supply of wheat. This monitoring will also stop the illegal entry of wheat to the
country.
Electricity problem is one of the main problems. This problem can only be solved if proper
supply of electricity is made sure to the mills. Majority of mills surveyed, shared electricity as
their main concern. This concern can be only resolved with proper and cheap supply of wheat to
the mills.
Afghan Wheat and Flour Market
Majority of surveyed mills and importers as well as farmers were not satisfied with the
involvement of government. According to their response, government, instead of solving
problems more often cause problems. With the involvement of government in the imported
goods some of the problems can be resolved. For instance:
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1. Government must make sure farmers are provided with proper and best quality seeds.
2. Government must make sure fertilizers are properly tested before they are provided to
farmers and that too at discounted prices.
3. Government must provide subsidy on electricity to the mills.
4. Government must have proper negotiations with the exporting countries in order to lower
the taxes on the imported flour and must high taxes on imported wheat. This will make
the mills use local wheat more.
5. Government policies must provide relief to the farmers and the wheat and flour industry
as a whole by giving importance to this industry.
6. The entry of raw material to the country should be monitored and made sure raw material
should be provided on time.
Majority of big mills in the country are working with partial damage to the machinery. These
machines can be repaired or put to work properly only if they are given attention. Mills should be
properly surveyed by government officials and after proper survey; their problems regarding
machinery should be resolved.
These mills, once properly working, must be given target to attain on daily, weekly, monthly and
yearly basis. These targets can also be given to farmers. This practice is common in the
neighboring country where farmers are given target per hectare and their wheat is properly
priced. This wheat cannot be sold in higher prices. Implementing this policy can provide relief to
both farmers as well as mills.
The availability of proper rail line near Herat can be a huge help. Wheat coming from
Uzbekistan and Kyrgyzstan can be brought better. The availability of storage capacity near the
borders is another plus. Such proper storage facilities can be made near the borderlines where
wheat enters the country through Pakistan. This will not only give longer life to the wheat and
flour, but will provide proper and high quality wheat to the people of Afghanistan.
A proper organization that could benefit the wheat and flour industry in the country should be
established. This organization can be monitored by government for the early warnings and
should provide proper follow-ups on the wheat entering and produced in the country. This way
better plan can be formed to increase the production within the country.
Since majority of wheat produced within the country is irrigated wheat and Afghanistan has in
the past gone through several droughts, Khawrin Dams “mud dams” can be built. Water is
essential for wheat and the shortage of water in Afghanistan is one of the main reasons for the
reduced production. Providing proper irrigation system in the beginning or building proper dams
could be expensive. Mud dams are one of the economically less expensive and effective ways of
providing water in time. These dams could store water for a long time and when droughts occur,
this water could provide the needed water.
Afghan Wheat and Flour Market
Afghanistan is one of the less dense countries with the population of around 30 million. This
means there plenty of land that is not used. Government could start a new policy of giving this
land to farmers for free. Giving each farmer few hectares of land where farmer can build a home
for himself, this could bring a huge change in the production of the wheat in the country. Giving
these farmers a target with share policy would not only encourage more farmers to start
cultivating wheat, but the production will increase many folds. These farmers could be placed in
rain fed wheat-cultivating lands or in places where they could be provided with water in form of
proper irrigation or Khawrin Dams.
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Conclusion
The purpose of this paper is to put some light on the excising wheat and flour market,
production, problems, opportunities and recommendations on how to improve the productivity as
well as tackle the inflow of massive import in the sector. In spite of being an agriculturally relied
country and wheat being the major crop, still wheat demand is not met within the country.
In Afghanistan, wheat is cultivated in two seasons; in spring and fall. Wheat is cultivated on
more land than any other crop and the production rose to more than 5 million tons in last year;
however, the demand is more than 6 million tons. The shortfall is often solved with the
contribution of the wheat imported from two of the biggest exporters of wheat in the region;
Kazakhstan and Pakistan. The problem with Pakistani wheat is the imported material is often and
largely refined (flour). The entry of flour instead of wheat grains because the biggest economic
blow to the few running mills in the country. On the other hand the import of flour instead of
wheat grain is good for the wheat production within the country, as mills have to grind locally
produced grains as well.
One of the main factors of this import is the quality of afghan wheat. It is often sited that afghan
wheat lacks the quality that is ensured by the imported wheat from other countries. The taste of
imported wheat is also appreciated within Afghanistan. There are genetically modification
methods where experiments can be done on wheat, this way better quality wheat can be produced
within the country.
The output of irrigated wheat is much bigger than rain fed wheat. Afghanistan as a country has
gone through droughts in recent memory, these areas where rain fed wheat is produced often are
not productive enough or not at all. For this purpose the building of dams is a solution that can
last forever and increase the productivity of this almost negligible quantity into many folds more.
The irrigated lands are often left without water as well, this due to the outdated irrigation system.
If worked, the irrigated wheat productivity can also increase exponentially.
Afghan Wheat and Flour Market
Milling industry, in spite of being the biggest agro-industry of the country is dilapidated due to
outdated machinery, lack of electricity, and lack of raw material (wheat grains). Currently there
are thousands of water mills, small rotating mills or stone mills that provide the majority of the
need of farmers’ households. There are some new and modern mills that have come into being in
the last decade, unfortunately their number and output is far less than desired. With proper
supply of electricity, production increase, and investment by privatization or government
involvement in the mills, this industry could become backbone of Afghanistan economy.
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The government must show willingness and involvement in the wheat and flour sector. With
proper running of the few mills and with accurate production and distribution chain of wheat
grains within the country, the sector can reach the same heights that it once touched in the 1980s.
The imports of wheat grain and flour must be properly regulated in order to have a proper plan to
increase the production in the country. Government must involve private investors in investing in
the wheat and flour sector. With the involvement of private investors in genetically modifying
the seed for better quality seeds, fertilizer production, pesticides for the rust diseases that often
inflict the wheat crop and the making of new mills, the industry has the biggest potential.
Afghan Wheat and Flour Market
References
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•
Donley A. Anal yz ing Afghanistan’s wheat flour market [Online].
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Styles L. Afghanistan Milling Assessment. [Online].
http://dlca.logcluster.org/display/public/DLCA/2.7+Afghanistan+Milling+
Assessment;jsessionid=BE48367BD3E79347FA7A6496DB221153
[December. 2015].
•
Persaud S. Afghanistan’s Wheat Flour Market: Policies and Prospects. United States
Department of Agriculture: WHS-13I-01. 2013.
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Afghanistan Statistical Yearbook 2013 - 2014, CSO.
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Persaud, S. Long-Term Growth Prospects for Wheat Production in Afghanistan. Outlook
Report: WHS-11L-01. 2012.
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Food Security Response Analysis Support Team Afghanistan (RASTA). Wheat Markets
and Wheat Availability in Afghanistan. European Commission Humanitarian Aid. 2012.