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The world bank policy, research working paper no. 5466, November, Anna D’Souza and Dean Jollife (2010)

A household-level research in Afghanistan reveals that the 2007-2008 global food crisis had an adverse impact on its people. The paper examines the food-based coping mechanisms that the households employed during such shocks and found that during the summer of 2008, over one- third of Afghan households were unable to meet their minimum daily energy requirements. The study further found that increases in the price of wheat flour led to large reductions in monthly per capita food consumption, but smaller declines in per capita daily calorie intakes. Finally the paper found evidence that the demand for wheat products were upward sloping among certain subpopulations despite the increase in food prices.

The 2007/08 global food crisis witnessed the doubling of the world price of staples. For food-insecure countries with vulnerable populations, like Afghanistan, the crisis had a disproportionate effect on the poor. The subsequent erosion of purchasing power plunged households into poverty and aggravated the situation of the already impoverished households.  They coped with such negative shocks by relying on family help, selling assets, borrowing money or in extreme cases, reducing intake of food and nutrients.

D’Souza and Jollife studied the impact of this global increase in food prices on Afghan households using direct measures of household consumption. Their analysis of the effects of the food crisis was based on data collected prior to and during the crisis and is thus one of the very few such empirical assessments. Furthermore it is the first recorded analysis on food insecurity from a country in conflict, Afghanistan. The authors estimated the relationship between household-level food security and increasing food prices by using a cross-sectional and nationally representative survey. The data was collected from the National Risk and Vulnerability Assessment (NRVA) 2007/08 which included a sample of 20,576 households between August 2007 and September 2008 covering the 34 Afghan provinces. The survey contained detailed information on the frequency and quantity of consumption of 91 food items. This allowed the researchers to observe how households changed the composition of their food basket in response to price changes and in the process, enabled them to construct measures of household food security. D’Souza and Jollife focused on two dimensions of food security, namely access and utilization. Access has been defined as the household ability to acquire food which depends on income, prices and market access, while utilization is referred to as an individual’s ability to obtain nutrients and energy from food. For the purposes of their analysis, the authors examined two facets of utilization: measures of dietary diversity and the consumption of a key nutrient, protein.

Some key findings have emerged from this paper. Firstly the authors found that real food consumption has declined 33 percent during the increase in food prices from

August 2007 to September 2008. To be precise, average monthly real food expenditure fell from 1200 Afghani to 798 Afghani in the summer of 2008, while the percentage of households consuming less than 2100 calories per person per day increased from 24% to 34%. In addition to the global food shock, Afghanistan experienced several domestic shocks of its own that led to a disruption in its food supply network. Due to droughts and early melting of snow, the 2008 wheat harvest was only 1.5 million metric tons, which was the lowest output since 2000.

The impact was exacerbated by Pakistan imposing export bans on its wheat. All these factors combined to increase the prices of domestic wheat and wheat flour by over 100% between fall 2007 and summer 2008. Since wheat is a major produce and the main staple of the Afghan diet, the effect on household welfare was significant. Increases in the price of wheat flour have been associated with declines in some dimensions of welfare in Afghan households. A one percent increase in the price of domestic wheat flour has been linked with a 0.20 percent fall in real monthly per capita food consumption. The magnitude of this effect is large, given that wheat prices have more than doubled during the crisis.

The estimates based on dietary diversity and calories show that households are able to smooth out the impact of a large change in prices to a certain extent. A one percent increase in wheat flour prices result in a decline in per capita daily calorie intake of 0.07 percent – the effect on calorie intake is small in response to a change in prices. The change in dietary diversity on the other hand is shown by the large decline in per capita protein intake; a one percent increase in price results in a 0.25 percent decline in grams of protein consumed per person per day. The findings imply that Afghan households have traded off quality for quantity – the price increases have forced households to change the content of their diets in order to maintain calories. The households have shifted towards lower quality (low nutrient content) and cheaper foods and in the process have acquired more food to maintain a given number of calories. Expenditure shares of all food groups have declined, apart from grains. Fruits experienced the largest drop, thus implying that it is a luxury good. This observation is consistent with the theory that there is usually a substitution across food groups and a shift in demand towards staple food consumption, when prices of food products rise.

The impact of rising food prices have differed across rural and urban households, with the percentage decline in real monthly per capita food consumption in urban areas being double that of the decline in rural areas. This finding is consistent with the literature on the global food crisis, indicating that the urban areas bear the brunt of price shocks.

Finally, it was observed that while price increases in rural areas reduced demand for wheat products in line with the basic law of demand, a similar price increase in urban areas led to a higher demand for wheat products. This pattern of demand in the urban areas demonstrate the paradox of Giffen goods; the income effect of a price increase erodes the purchasing power, thereby reducing the demand for all normal goods but increasing the demand for inferior goods (wheat products in this case). An alternative explanation was that even though the prices of wheat doubled, it could still have been cheaper to obtain calories rather than switching to other sources such as meat.

Overall the authors concluded that pursuing low levels of dietary variety as a coping mechanism is detrimental to child nutrition, maternal health and adult productivity. They postulate that if another crisis were to occur, many households would most likely cut back on micronutrient-rich foods as well as calories. Such an outcome could exacerbate the already low nutrient intake in Afghanistan and push those households who are on the fringes of poverty over the threshold.