For information only - not an official document
UNIS/NAR/1095
20 January 2011
UNODC Warns that High Opium Prices May Reverse the Gains of Recent Years
VIENNA, 20 January (UN Information Service) - Soaring opium prices may induce more farmers to grow opium, warned the United Nations Office on Drugs and Crime (UNODC) in its full 2010 Afghanistan Opium Survey released today. The high prices are based on speculation arising from an opium blight that halved production in 2010 and from ongoing military operations, which are creating uncertainty among opium farmers regarding future cultivation.
"There is cause for concern. The market responded to the steep drop in opium production with an equally dramatic jump in the market price to more than double 2009 levels," said Yury Fedotov, Executive Director of UNODC.
"We cannot continue business as usual," stressed the Executive Director noting that after a steady decline from 2005 to 2009, prices are rising again. "If this cash bonanza lasts, it could effectively reverse the hard-won gains of recent years."
The cause of the decline in production was a naturally occurring plant disease that ravaged Afghanistan's major opium poppy-growing provinces of Hilmand and Kandahar.
Impact on Afghan economy
Poppy-growing households saw a cash windfall. In 2010, the average farm-gate price of dry opium at harvest time was US$ 169 per kg - a 164 per cent increase over 2009, when the price was US$ 64 per kg. Despite the drop in production, the gross income per hectare of opium cultivated increased by 36 per cent to US$ 4,900. The average annual income of opium-growing households in 2009 was 17 per cent higher than for households that had stopped opium cultivation.
However, the dramatic opium price increases at the local level did not translate into similar price increases in neighbouring countries. Afghan traffickers are heavily involved in shipping opiates (morphine/heroin) abroad, notably to Iran and Pakistan, and to a lesser extent, Central Asia. Cross-border prices remained relatively stable.
As a result of falling production and stable cross-border prices, funding from the opium economy to Afghan criminal groups halved in 2010. The total value of exported opium and heroin was US$ 1.4 billion, compared with US$ 2.9 billion in 2009 - a 50 per cent drop. The gross export value in 2010 amounted to 11 per cent of the GDP, compared to 26 per cent in 2009.
Rural development works
On the bright side, rural development has encouraged the cultivation of licit crops, and this year, a distinct correlation was seen between the provision of agricultural assistance and a drop in opium cultivation. Giving farmers access to markets also helped them shift away from opium poppy cultivation. In villages located close to agricultural markets, farmers planted less poppy crop than in those that had no access to markets.
"We encourage donors and the Afghan community to continue to invest in alternative livelihood programmes and increase market access for farmers. But security, stability and an environment free of corruption remain the key elements to making such initiatives effective and sustainable," said Mr. Fedotov.
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