A Regional View of Wheat Markets and Food Security in Central Asia: With a Focus on Afghanistan and Tajikistan

This paper reviews wheat market dynamics in the Central Asia region. As a region whose countries experience perennial food deficits, trade plays a central role in ensuring adequate food availability.

The paper is the result of fieldwork undertaken in spring 2011 to establish a better understanding of the dynamics, structure, trends, and constraints confronting the wheat marketing sector in the region, and to better understand the role that wheat trade plays in ensuring food security for the region.

For the purposes of this study, the Central Asia region includes Kazakhstan, Uzbekistan,
Turkmenistan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan, and the Islamic Republic of Iran. The major findings are summarized below.

1. Wheat markets in the region function relatively effectively and are relatively well-integrated, considering the challenges of geography, infrastructure, political tensions, and friction that beset countries in the region.
2. Though regional wheat markets function effectively, export bans at different periods by Pakistan,
   Kazakhstan, and Russia have had a significant impact on regional wheat markets’ ability to function effectively.
3. The region shows a high degree of dependence on wheat. This commodity dependence is indeed higher than in many countries in other parts of the world, notably East and West Africa.
4. The study found little evidence of non-competitive market structures that would impede the flow of wheat grain from food surplus to food deficit areas. Price differentials between regions, under most circumstances, appear to reflect transportation costs, tariffs and customs, and related marketing costs. The study does not find evidence of excessively large marketing margins or excess profits accruing to actors along the marketing chain.
5. The small size of the chronically food-insecure countries relative to the large wheat-producing countries (Pakistan, Iran, and Kazakhstan) exacerbates their vulnerability. Specifically, changes in internal production and trade for the two large countries, Pakistan and Iran, have a strong impact on wheat trade dynamics and availability in the region. Changes in available exports from Kazakhstan, the third-largest wheat-producing country in the region, have a strong impact on prices and overall grain availability.
6. There is a broad and heterogeneous mix of policy environments for wheat production and trade among countries in Central Asia. Afghanistan and Kyrgyzstan have limited government intervention in the wheat sector, whereas there is strong public-sector control over wheat production and marketing in Uzbekistan and Turkmenistan. Other countries are somewhere in between: Kazakhstan’s government provides support for production, and Pakistan’s exerts periodic control over marketing and trade. In some cases, these policy interventions have a strong impact on the dynamics of wheat trade, as was the case during Pakistan’s ban on wheat exports in 2008.
7. For the purposes of food security monitoring and early warning, the study finds that wheat markets in northern Kazakhstan and the Punjab area of Pakistan are key markets to watch in relation to regional wheat market dynamics and regional wheat availability.