Yugay, S anisla ; Gö z, Linde; S anidze, Mi anda
A icle — Published Ve sion
Impac o he Ruble exchange a e egime and Russia's
wa in Uk aine on whea p ices in Russia
Ag icul u al Economics
P o ided in Coope a ion wi h:
Leibniz Ins i u e o Ag icul u al De elopmen in T ansi ion Economies (IAMO), Halle (Saale)
Sugges ed Ci a ion: Yugay, S anisla ; Gö z, Linde; S anidze, Mi anda (2024) : Impac o he
Ruble exchange a e egime and Russia's wa in Uk aine on whea p ices in Russia, Ag icul u al
Economics, ISSN 1574-0862, Wiley, Hoboken, NJ, Vol. 55, Iss. 2, pp. 384-411,
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Recei ed: 10 May 2023 Re ised: 29 Sep embe 2023 Accep ed: 15 Decembe 2023
DOI: 10.1111/agec.12822
ORIGINAL ARTICLE
Impac o he Ruble exchange a e egime and Russia’s wa
in Uk aine on whea p ices in Russia
S anisla Yugay1,2Linde Gö z3,2Mi anda S anidze2
1Maqsu Na ikbaye Uni e si y, As ana,
Kazakhs an
2Leibniz-Ins i u e o Ag icul u al
De elopmen in T ansi ion Economies
(IAMO), Halle, Ge many
3Ma in Lu he Uni e si y
Halle-Wi enbe g, Halle, Ge many
Co espondence
S anisla Yugay, Maqsu Na ikbaye
Uni e si y, Ko galzhyn highway, 8,
As ana, 010000, Kazakhs an.
Email: s_yuga[email p o ec ed]
Abs ac
We assess exchange a e pass- h ough when he Ruble exchange a e was man-
aged in compa ison wi h when i became ee- loa ing. Es ima es o he e o
co ec ion model o milling whea p ices sugges exchange a e pass- h ough
o be s onges in Russia’s No h Caucasus, he egion closes o he Black Sea
po s, and weakes in he emo e egions o Volga and Wes Sibe ia since he
Ruble exchange a e became ee- loa ing in 2014. In con as , we ind Russian
egional whea p ices and he Ruble/USD exchange a e no coin eg a ed when
he exchange a e was managed. Fu he , eed whea (Class 5) is only weakly in e-
g a ed compa ed o whea Classes 3 and 4 o human consump ion. Wi h Russia’s
in asion o Uk aine, exchange a e pass- h ough o Russian whea p ices has
dec eased sha ply. Thus, he Uk aine wa d i es he disin eg a ion o Russia’s
whea sec o om in e na ional ma ke s and adds o he isks o supply chain
dis up ion and geopoli ical isks, which may inc ease expo supply ola ili y.
To s eng hen ade esilience, coun ies ha a e dependen on whea impo s
should di e si y hei impo sou ces.
KEYWORDS
exchange a e pass- h ough, ood secu i y, Russia, he wa in Uk aine, whea p ices
JEL CLASSIFICATION
Q02, Q13, Q17
1 INTRODUCTION
Russia ad anced om a whea impo e o he p ima y
global whea expo e in 2017–2018, su passing he Uni ed
S a es as he la ges global whea expo e (USDA, 2018).
Be ween 2000 and 2020, Russia’s whea p oduc ion mo e
han doubled and he sha e o expo s in i s p oduc ion
inc eased o a ound 50% (UN COMTRADE, 2023;USDA-
PSD, 2023). Russia’s expo s accoun o abou 20% o wo ld
This is an open access a icle unde he e ms o he C ea i e Commons A ibu ion License, which pe mi s use, dis ibu ion and ep oduc ion in any medium, p o ided he
o iginal wo k is p ope ly ci ed.
© 2024 The Au ho s. Ag icul u al Economics published by Wiley Pe iodicals LLC on behal o In e na ional Associa ion o Ag icul u al Economis s.
whea expo s and mo e han 50% o Russia’s whea expo s
a e deli e ed o he highly whea impo dependen coun-
ies in A ica and he Nea Eas . Fo example, in 2018, he
sha e o Russia’s whea expo s in Egyp ’s o e all whea
impo s amoun ed o almos 75% (UN COMTRADE, 2020).
The as g ow h in Russia’s whea expo s was os e ed
by he s ong de alua ion o he Russian Ruble. Ha ing
occu ed a e he Russian Cen al Bank’s abandonmen o
he managed exchange a e egime in No embe 2014, his
384 wileyonlinelib a y.com/jou nal/agec Ag icul u al Economics. 2024;55:384–411.
YUGAY e al. 385
s ongly inc eased he compe i i eness o Russian whea
expo s on in e na ional ma ke s. Following a plumme -
ing wo ld oil p ice, which signi ican ly sh ank Russia’s
oil-dependen economy, Russia’s annexa ion o C imea in
2014, Russia’s implemen a ion o a ood impo ban agains
wes e n coun ies, and he Wes ’s economic sanc ions
agains Russia, he Ruble’s alue ell by oughly 70% om
2014 o 2015. On he one hand, his subs an ial de alua ion,
spu ed whea expo s, bu , on he o he , i su ged domes ic
in la ion by inc easing impo p ices. Fo ins ance, Russia’s
consume p ice index inc eased om 7.8% in 2014 o 15.5%
in 2015 (IMF, 2021).
On Feb ua y 24, 2022, Russian mili a y o ces in aded
Uk aine, which ab up ly dis up ed he global alue chain
o g ains and led o u he subs an ial inc eases in com-
modi y p ices on he wo ld ma ke s (Ihle e al., 2022;
Leg and, 2022), ein o cing global ood secu i y challenges
(Hellege s, 2022; Mo aleb e al., 2022), wi h consequences
o popula ions o low-income coun ies pa icula ly
(Abay e al., 2023; A nd e al., 2023; Júnio e al., 2022;
Lin e al., 2023). None heless, Russia’s whea ading com-
panies ha e con inued o expo whea o he highly
impo -dependen coun ies in he Global Sou h, while he
companies in he g ain-expo ing wes e n coun ies ha e
con inued o compe e wi h Russia on global g ain ma ke s.
Fo he 2022–2023 ma ke ing season, Russia’s whea p o-
duc ion amoun ed o 95.4 million ons, allowing Russia o
expo a eco d amoun o 47.8 million ons o whea (IGC,
2023).
In he i s mon hs o he wa in Uk aine, whea
impo s om Russia and Uk aine o he majo i y o
A ican coun ies had dec eased (Re ini i -Eikon, 2022;
UN COMTRADE, 2022). Fou een A ican coun ies ha e
comple ely s opped impo ing whea om Russia ( om
Ma ch o Sep embe 2022 compa ed o 2021). In con-
as , he No h A ican coun ies o Alge ia, Egyp ,
Libya, Tunisia, and Sudan, which ha e close poli ical ies
wi h Russia, ha e a he inc eased hei whea impo s
om Russia (Gö z & S anidze, 2023). P ice o ma ion
wi hin Russia’s domes ic whea ma ke s also impac s he
size o he Russian whea expo supply on he wo ld
ma ke h ough p oduce s’ incen i es, which depend on
cu en p ices on domes ic ma ke s, ade cos s, and expo
es ic ions.
Following Russia’s in asion o Uk aine, he Russian
Ruble de alua ed om 80 o 120 Ruble/USD wi hin 2
weeks. As a esponse, he Russian Cen al Bank imple-
men ed capi al con ols on he exchange a e ma ke , and
he exchange a e s a ed o e e se in he middle o Ma ch
2022, app ecia ing up o he p e-wa le el in a ew mon hs
(I skhoki & Mukhin, 2022). This de elopmen was caused
by a decline o impo s (Lo enzoni & We ning, 2022), while
a he same ime Russia’s expo s o oil and na u al gas sus-
ained when capi al con ols p e en ed capi al ou lows.
Russia accoun ed o a su plus amoun ing o $183.1 billion
USD om Janua y o Augus 2022, which is subs an ially
highe compa ed o he $60.9 billion USD su plus obse ed
o e he same pe iod o he p e ious yea (UN, 2022).
As a esul , he s ong Ruble obse ed in 2022 dec eased
he compe i i eness and slowed down whea expo s om
Russia o wo ld ma ke s in July and Augus 2022 espe-
cially.1Mo eo e , Russia s a ed o expo whea in Rubles
as a esponse o sanc ions om he Wes (Reu e s, 2022).
Ne e heless, whea is aded in USD on he wo ld ma ke
and Russian ade s can be expec ed o con inue accoun -
ing o he Ruble/USD exchange a e in hei ading
ac i i ies.
Russia’s impo o ag icul u al inpu s, including c op
p o ec ion p oduc s, ag icul u al machine y, and seeds, o
which he coun y is highly impo dependen on wes e n
coun ies and he Eu opean Union (EU) in pa icula , ha e
been sus ained since he Uk aine wa . I should be no ed
ha ag icul u al inpu s a e exemp om wes e n eco-
nomic sanc ions and can con inue o be aded wi h Russia.
None heless, he size o he inpu impo s has dec eased,
which may ha e pa ially esul ed om he de alua ion o
he Ruble, which has inc eased he p ice o hose impo ed
inpu s. This may also ha e con ibu ed o he expec ed
dec ease in Russia’s whea p oduc ion by a ound 8% om
95.4 million ons in 2022–2023 o he o ecas ed 87.4 million
ons in 2023–2024 (IGC, Sep embe 2023).
Howe e , in o de o comply wi h he wes e n sanc-
ions, mul ina ional ag icul u al ade companies, which
accoun ed o up o 30% o Russia’s g ain businesses be o e
he Uk aine wa s a ed, pu hei planned in es men s in
he Russian g ain sec o on hold. In es men oppo uni-
ies o domes ic companies may ha e also been educed
by wes e n inancial sanc ions. Thus, he u he mobiliza-
ion o Russia’s addi ional g ain po en ial is ques ionable.2
1The compe i i eness o Russia’s whea expo s is u he educed by: (i) a
a iable whea expo ax, implemen ed by he Russian go e nmen since
June 2021; (ii) high anspo cos s esul ing om a high isk o essels
en e ing he Black Sea; and (iii) o e -compliance o whea impo e s and
anspo companies wi h sanc ions, implying ha less g ain is bough
om Russian expo companies.
2Whea expo s om Russia migh ha e dec eased due o highe ans-
po a ion cos s inside o Russia a e he beginning o he wa in Uk aine.
In pa icula , sky ocke ing wo ld oil p ices migh inc ease domes ic gaso-
line p ices in Russia. Howe e , in 2022, a e age p ices o diesel uel and
gasoline in Russia emained ai ly s able. Re ail gasoline p ices luc ua ed
wi hin he ange om 50.5 o 51 Rubles pe li e , while diesel p ices a y
om 54.4 o 55.6 Rubles pe li e . Sligh spikes in diesel uel p ices we e
obse ed in Feb ua y and Oc obe 2022, bu he g ow h did no exceed 1%.
Since Janua y o Decembe 2022, he e ail p ice o diesel uel ose by 8%
and gasoline by 0.9% (Vedomos i, 2022). These de elopmen s do a he
no sugges ha he oil p ice de elopmen had a signi ican in luence on
inne -Russian anspo cos s.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
386 YUGAY e al.
On July 1, 2023, he mul ina ional ag icul u al ading
companies o Ca gill, Louis D ey us, Vi e a, which
accoun ed o 16% o Russia’s g ain expo s, exi ed he Rus-
sian g ain expo ma ke (Reu e s, 2023 a ious issues) ol-
lowing ope a ional di icul ies eme ging om he Uk aine
wa and go e nmen p essu e (Mille Magazine, 2023).
Al hough hei g ain ade has been con inued ia o -
me local managemen se ups wi hin he new companies,
anspo challenges esul ing om inc eased inancial
and secu i y isks o ship anspo om Russia’s Black Sea
po s ha e been occu ing and a e expec ed o dec ease
expo quan i ies (Reu e s, 2023). None heless, acco ding
o es ima es om he In e na ional G ains Council, whea
expo s a e expec ed o inc ease by a ound 1.5% in 2023–
2024 ( om 47.8 million ons in 2022-2023 o 48.6 million
ons; IGC, 2023).3
Russia o en es ic s i s whea expo s in o de o p o-
ec i s domes ic ma ke s om ising wo ld ma ke p ices
and o s abilize domes ic p ices. Since he ou b eak o
he COVID-19 pandemic in 2020, Russia’s whea expo s
ha e been subjec o an expo ax, pe iodically supple-
men ed by an expo quo a (Feb ua y o May) and a ban on
expo s o he coun ies o he Eu asian Economic Union
in 2021. Wi h he implemen a ion o a loa ing expo ax
in June 2021, whea expo es ic ions ha e become pe -
manen . The expo ax, which amoun ed o 70% o he
di e ence be ween he whea p ice and he baseline p ice
(200 USD/ ), was changed o a p og essi e loa ing whea
expo ax on Feb ua y 15, 2022. Howe e , as wo ld whea
p ices su ged and he Ruble signi ican ly app ecia ed a e
he s ong de alua ion di ec ly ollowing Russia’s in a-
sion o Uk aine, he Russian go e nmen in oduced a
new measu e on July 6, 2022, equi ing he paymen o
he whea expo ax in Rubles ins ead o USD wi h he
baseline p ice also se in Rubles. The cu en expo ax
sys em implies a 70% du y on he p ice di e ence be ween
he whea p ice and he baseline p ice (15,000 Ruble/ )
paid in Rubles (Global T ade Ale , 2022). The ela i ely
la ge whea expo ax nega i ely a ec s he p o i abili y
o whea p oduc ion and may also ha e con ibu ed o he
o ecas ed dec ease in whea p oduc ion o 2023–2024.
Agains his backg ound, we in es iga e he in luence
o he Ruble/USD exchange a e on p ice de elopmen s
in he Russian domes ic whea ma ke s in he six main
3The OECD/FAO Ou look (June 2022) expec s ha Russia’s whea p o-
duc ion and expo s will u he inc ease in he nea , medium, and
long- un u u e. In pa icula , Russia’s whea expo s a e o ecas ed o
inc ease om 39.9 million ons in 2022–2023 o 43 million ons in 2023–
2024. This mobiliza ion o addi ional p oduc ion po en ial is based on
he assump ion o sligh inc eases in he whea a ea ha es ed as well as
yields pe hec a e. A USDA-WASDE epo (2023) o ecas s an inc ease in
Russian whea expo s by a ound 6%, om 46 million ons in 2022–2023
o 49 million ons in 2023–2024.
whea p oducing egions o Russia (No h Caucasus, Black
Ea h, Cen al, Volga, U als, and Wes Sibe ia), ocusing on
he possible in luence o he Uk aine wa . Regional p ice
ela ionships wi hin Russia’s whea ma ke ha e been
in es iga ed be o e, ocusing on he in luence o expo
es ic ions on he ela ionship be ween he wo ld whea
p ice and Russian domes ic whea p ices (Gö z e al., 2013,
2016). Howe e , he impo ance o mac oeconomic ac o s
in he p ice o ma ion o domes ic whea p ices in Rus-
sia ha e ba ely been explo ed be o e. To he bes o he
au ho s’ knowledge, his is he i s s udy add essing he
e ec s o he Ruble exchange a e on whea p ices unde
he ee- loa ing exchange a e egime ha was es ablished
in Russia in 2014. Bu ako (2016) does no ind exchange
a e pass- h ough o whea p ices in Russia du ing
he managed exchange a e egime o e he 1999–2015 ime
pe iod. Resul s by Lie e (2009) sugges ha he exchange
a e plays an impo an ole in de e mining p ice gaps
be ween domes ic and bo de whea p ices in Russia.
We dis inguish he pe iod be o e and a e he in oduc-
ion o he ee- loa ing exchange a e egime in No embe
2014 and conside he pe iod o he Uk aine wa sepa a ely.
Applying an e o co ec ion model, we accoun o he di -
e en classes o whea , ha is, milling whea o Classes 3
and4and eedwhea o Class5,whicha ecommonlysold
h ough di e en channels along he whea supply chain.
We assume ha di e en supply ne wo ks wi h di e se
deg ees o o eign cu ency dependency migh in luence
he ela ionship be ween he p ices o he a ious whea
classes and he exchange a e di e en ly.
We also compa e he in luence o he exchange a e wi h
he wo ld whea p ice on domes ic Russian whea p ices.
Fu he mo e, o complemen he analysis o he exchange
a e pass- h ough o whea p ices in Russia, we ex end he
analysis o he whea ma ke in F ance, which is among he
leading whea expo e s and, he e o e, se es as an empi -
ical benchma k in ou s udy. In con as o he Russian
Ruble, he Eu o exchange a e has emained a he s able
h oughou he unde lying ime pe iod.
This s udy also adds o he s and o li e a u e examining
he exchange a e’s in luence on ag icul u al p ices, which
was i s in es iga ed by Schuh (1974). While some au ho s
ha e ollowed a p ice ansmission app oach (F ank &
Ga cia, 2010; Ha zenbuehle e al., 2016;Mae al.,2015;
Mao e al., 2021;Swi ,2004), o he s ha e applied a p ice
ola ili y amewo k o add ess his issue (Jumah & Kuns ,
2001;O ,2014; Se a & Gil, 2013).
Only a ew pape s analyze exchange a e pass- h ough
o domes ic g ain p ices. Fo example, Ha zenbuehle
e al. (2016) show ha US co n and soybean p ices a e
mo e esponsi e o he exchange a e unde low s ock
condi ions. Nazlioglu and Soy as (2011) ind e idence o
long- un causali y o he exchange a e o maize and
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 387
FIGURE 1 Map o whea p oduc ion egions in Russia.
Sou ce: own illus a ion.
sun lowe , while causali y was no con i med o whea ,
co on, and soybeans in Tu key. Fu he mo e, Ma e al.
(2015) show ha ag icul u al p ices o whea , colza oil, and
japonica ice in China we e neu al o he luc ua ions o
he exchange a e in he long un, excep o soybeans.
In addi ion, he numbe o s udies ha add ess he
impo ance o he exchange a e egime o exchange a e
pass- h ough o commodi y p ices is limi ed. Be gin and
Feens a (2009) ind ha inc eased sha e o impo s om
he Uni ed S a es o China, which had a ixed exchange
a e egime, educed exchange a e pass- h ough o impo
p ices in he Uni ed S a es. Fu he mo e, Mallick and Ma -
ques (2010) ind incomple e exchange a e pass- h ough
o Indian expo p ices a e ha ing ans o med o a
ee- loa ing exchange a e egime. Resul s by Ge e al.
(2010) sugges ha ans o ma ion o he managed loa ing
exchange a e egime in China in luenced co on’s u u e
p ices in he Uni ed S a es and China.
The emainde o his pape is s uc u ed as ollows:
Cha ac e is ics o he Russian whea ma ke , expo ma -
ke condi ions and compe i ion a e discussed in he ol-
lowing Sec ion 2. The me hodological amewo k and
model es ima ion a e p esen ed in Sec ion 3, while Sec-
ion 4discusses da a and da a p ope ies, and Sec ion 5
p esen s empi ical esul s. Finally, conclusions and policy
implica ions a e d awn in Sec ion 6.
2 RUSSIAN WHEAT MARKET
CHARACTERISTICS, EXPORT MARKET
CONDITIONS, AND COMPETITION
Whea p oduc ion in Russia is sp ead o e he six p ima y
g ain p oduc ion egions o No h Caucasus, Black Ea h,
Cen al, Volga, U als, and Wes Sibe ia (Figu e 1). No h
Caucasus is he main expo ing egion o Russia, which
has di ec access o he Black Sea po s. Wi h a mo e han
4000 km dis ance o he Black Sea po s, Wes Sibe ia is he
mos pe iphe al whea p oducing egion. The e o e, Wes
Sibe ia almos exclusi ely supplies whea o he domes ic
whea ma ke , and especially o he Cen al egion, whe e
he whea consuming co e o Moscow is ound along wi h
a la ge li es ock p oducing sec o . Wi h hei dis ance o
he Black Sea amoun ing o a ound 1900 and 2600 km,
espec i ely, Volga and U als a e also la ge g ain p oducing
egions.
In his s udy, we p opose ha he e ec o he exchange
a e is no homogenous ac oss domes ic whea p ices in
Russia. We build on S anidze and Gö z (2019), who ha e
iden i ied he e ogenei y in he s eng h o p ice linkages
wi hin Russia’s egional whea ma ke s, a ibu able o
dis ance, anspo a ion in as uc u e, and ma ke in o -
ma ion sys ems. We acknowledge anecdo al e idence ha
indica es ha he s ong de alua ion enabled Russian
whea p oduce s o aise whea p oduce p ices is-à-
is whea expo companies by exe ing ma ke powe
(Rusag o ans, 2018).
The s ong de alua ion o he Russian Ruble in 2014–
2015 inc eased he compe i i eness o Russian ade s
on he wo ld ma ke and enabled hem o ea n highe
incomes om whea expo ac i i ies. Due o economic
sanc ions imposed by he Uni ed S a es, EU, and o he
wes e n coun ies, Russia was cu o om o eign in es -
men s and c edi s and expe ienced subs an ial capi al
ligh , which led o he de alua ion o he Ruble. In o de
o s abilize he Ruble’s exchange a e, he Russian Cen-
al Bank inc eased i s lending a e om 10.5% o 17% in
Decembe 2014, which was educed o 15% in Janua y 2015,
in o de o inc ease demand o he Ruble’s coun e ac ing
de alua ion (Lie e & Lie e , 2015). Mo eo e , Figu e 2
displays he impo ance o he plumme ing wo ld oil p ice
o he de alua ion o he Ruble a e he emo al o he
managed exchange a e egime. In 2020, he sha e o c ude
oil, oil p oduc s, and na u al gas in o al Russian expo s
was abou 43%, while he sha e o ag icul u al and ood
p oduc s was 8.8% (Ross a , 2021).
We suppose ha he Russian Ruble dep ecia ion agains
he USD had a s ong inc easing e ec on egional whea
p ices. This may be explained by he inc ease in expo
demand on he domes ic ma ke and whea p oduce s’
incen i es o inc ease hei p o i s by aising p oduce
p ices, which equi es some deg ee o ma ke powe .4
Whea p oduc ion cos s a e supposed o ha e inc eased,
since inpu s, such as seeds and machine y, we e pa ially
impo ed o , e en i hey we e p oduced domes ically, hey
could ha e been nomina ed in o eign cu ency, as in
he case o e ilize s. E en ually, highe p oduc ion cos s
aise in e nal p ices o whea wi h imely delay. The e-
o e, he in luence o mac oeconomic condi ions, such as
4In Ap il 2018, he Ruble’s de alua ion led o an inc ease in Russian
domes ic whea p ices by 10% and aised incen i es o whea expo s
(Rusag o ans, 2018).
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
388 YUGAY e al.
FIGURE 2 Whea p ices o Class 3, exchange a e and wo ld oil p ices.
No e: he e ical line co esponds o he change in he exchange a e egime in Russia.
Sou ce: Russian G ain Union, Cen al Bank o Russia, he US Ene gy In o ma ion Adminis a ion (EIA), own illus a ion.
he exchange a e, on he whea p ice de elopmen s ha e
o be conside ed, especially when he luc ua ion o he
exchange a e is high, as in he case o Russia.
O he ac o s ha di ec ly de e mining exchange a e
pass- h ough o commodi y p ices a e ag icul u al ade
policies, he ma ke powe o expo ma ke s and along
ood alue chains, he quali y o anspo a ion sys ems,
and he a ailabili y o ma ke in o ma ion (Lie e &
Pe saud, 2009). Ne e heless, exchange a es migh be
ansmi ed o domes ic p ices indi ec ly ia impo s and
p oduc ion inpu s denomina ed in o eign cu ency (Al-
Ab i & Goodwin, 2009). Howe e , he incomple e ans-
mission o exchange a e changes can p e en expo ing
coun ies om a aining highe le els o whea expo s
(Lie e , 2009).
As an example, he lockdown es ic ions in oduced
due o he COVID-19 pandemic in 2020 led o a subs an-
ial decline in wo ld oil p ices, esul ing in a de alua ion
o he Ruble. In pa icula , wo ld oil p ices declined by
70% wi hin 2 mon hs since he middle o Feb ua y 2020
and eached i s lowes le el o e he las wo decades
(Heige mose & Glauben, 2020). Mo eo e , he Russian
Ruble de alua ed by 22%, om 63.6 o 77.7 Rubles agains
he USD (Feb ua y 14, 2020, and Ma ch 28, 2020, espec-
i ely) (The Cen al Bank o he Russian Fede a ion,
2022).
In he con ex o he wa in Uk aine, g ain impo s om
he Eu opean Union and especially F ance ha e gained in
impo ance o whea impo ing coun ies due o he wa
isks associa ed wi h whea impo s om he Black Sea
egion. Fo ins ance, amoun ing o 815,000 ons, Egyp pu -
chased i s la ges whea ende in mo e han a decade om
F ance, Romania, Russia, and Bulga ia in o de o inc ease
i s whea ese es in June 2022, wi h F ance accoun ing
o he la ges sha e. Mo eo e , in he i s hal o 2022–
2023, F ance hea ily inc eased whea expo s o Alge ia
and Mo occo. Despi e highe ee on boa d (FOB) p ices
o F ench whea , he coun y has a compe i i e ad an age
in lowe anspo a ion cos s due o geog aphical p oxim-
i y o No h A ica in compa ison o o he expo e s such
as Aus alia.
Wi h nea ly 20 million ons supplied o he wo ld ma ke
in 2022, F ance is he la ges whea p oduce in he EU and
he ou h la ges whea expo e in he wo ld (UN COM-
TRADE, 2023). The mainland F ench e i o y has 56%
a able land and a ound 10 million hec a es o land is used
o he p oduc ion o ce eals, co esponding o a ound hal
o he a able land in he coun y. Simila o Russia, F ance
p edominan ly p oduces win e whea . In addi ion, whea
p oduc ion in F ance is impac ed by wea he anomalies, as
was also obse ed o he case o Russia. Howe e , he p o-
duc i i y o F ench whea is mo e han wo imes highe
compa ed o Russia (6.9 and 2.7 ons pe ha, espec i ely).
In 2020–2021, he main impo e s o F ench whea we e
China, Alge ia, Mo occo, and Egyp .
A s udy by Heige mose e al. (2021) e eals in e -
dependencies be ween he Egyp ian Gene al Au ho i y
Fo Supply Commodi ies (GASC) ende p ice and Rus-
sian and F ench expo p ices. Acco dingly, he e is high
compe i ion be ween F ench and Russian whea ade s
in he GASC ende sys em. Consequen ly, we conside
he F ench whea p ice as a sui able benchma k o
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 389
compa ison wi h he Russian whea ma ke . We he e-
o e complemen he analysis o he exchange a e pass-
h ough o whea p ices in Russia, wi h exchange a e
pass- h ough o whea p ices in F ance.
3 METHODOLOGICAL FRAMEWORK
AND MODEL ESTIMATION
To in es iga e he exchange a e pass- h ough o Russian
whea p ices, we employ a wo-s ep e o co ec ion model
(ECM) de eloped by Engle and G ange (1987). In ou
model amewo k, he whea p ice in one o he Rus-
sian whea p oduc ion egions (endogenous a iable) is
depic ed as a unc ion o he exchange a e and wo ld
whea p ice (exogenous a iables):
𝑃𝑑
𝑡=𝛽
0+𝛽
1𝐸𝑅𝑡+𝛽
2𝑃𝑤
𝑡+𝜀
𝑡(1)
Δ𝑃𝑑
𝑡=𝛿
0𝜀𝑡−1 +
𝐾
∑
𝑘=1 {𝛿1𝑘Δ𝑃𝑑
𝑡−𝑘 +𝛿
2𝑘Δ𝐸𝑅𝑡−𝑘 +𝛿
3𝑘Δ𝑃𝑤
𝑡−𝑘}+𝜔
𝑡
(2)
whe e 𝑃𝑑
𝑡is he domes ic whea p ice in he co esponding
Russian egion, ER is he Ruble/USD exchange a e, 𝑃𝑤
𝑡
is he wo ld whea p ice, and ε and ω a e s a is ical e o
e ms. Equa ion (1) cha ac e izes he long- un p ice equi-
lib ium be ween he egional whea p ice, he Ruble/USD
exchange a e, and he wo ld whea p ice. Pa ame e s
β1and β2deno e he exchange a e pass- h ough and
long- un p ice ansmission elas ici y, measu ing he pe -
cen age change in he egional whea p ice associa ed wi h
a 1% change in he exchange a e and wo ld whea p ice,
espec i ely.
We assume ha he exchange a e is exogenous o
domes ic whea p ices in Russia. This assump ion is mo i-
a ed by he a he low sha e (3.2%) o ce eal c ops in
Russia’s o al expo e enues, whe eas c ude oil expo s
amoun ed o 51.3% in 2020 (Ross a , 2021). Fu he , we
assume ha he wo ld whea p ice is exogenous o he
Russian whea p ices,5which is an assump ion based on
he indings o he exis ing li e a u e. Based on esul s o
he es on weak exogenei y o he 2011–2019 ime pe iod,
Heige mose e al. (2021) ind a leading ole o he F ench
whea expo p ice in he Egyp ian GASC ende ma ke ,
despi e he high ma ke sha e o whea expo e s in he
Black Sea egion and Russia. This is con i med by esul s
o S anidze and Du ic (2021) sugges ing ha he F ench
whea expo ma ke ansmi sp icesignals o heRus-
5The impo ance o Russian whea p ices in p ice disco e y on he wo ld
ma ke due o inc eased g ain expo s needs u he in es iga ion.
sian ma ke bu no ice e sa. Also, he aising ole o
he EURONEXT whea u u es ma ke in F ance o p ice
disco e y on he wo ld whea ma ke compa ed o he
CBOT in he USA is con i med by Janzen and Adjemian
(2017), who a gue ha he F ench u u es ma ke be e
e lec s he ma ke undamen als in he Black Sea whea
ma ke .
Conside ing ha he highes sha e o Russian whea
expo s is supplied o he Middle Eas and No h A ica
(MENA) egion, we conside he F ench expo p ice as
he co esponding wo ld whea p ice o Russian domes-
ic whea p ices. Also, Russian whea p ices migh adjus
o F ench whea p ices due o an unde de eloped u u es
ma ke in he Black Sea egion.
Equa ion (2) depic s sho - un dynamics, whe e 𝜀𝑡−1,
e o co ec ion e m, is he lagged esidual om he
long- un p ice equilib ium (1) ep esen ing empo a y
de ia ions om he long- un pa i y ela ionship and kis
he numbe o lags. The sho - un speed o adjus men
pa ame e , 𝛿0, indica es he speed a which domes ic
whea p ices in Russiaadjus o elimina e empo a y de ia-
ions and es o e he long- un p ice equilib ium. The ECM
is es ima ed indi idually o each Russian whea p oduc-
ion egion (No h Caucasus, Black Ea h, Cen al, Volga,
U als, and Wes Sibe ia) and whea class (Class 3, Class 4,
and Class 5).
To assess he in luence o he exchange a e on Rus-
sian whea p ices in he con ex o he wa in Uk aine,
we build on he p ice ansmission amewo k applied by
Ba es e al. (2019), and employ he ECM wi h p ice di e -
en ials acco dingly. The ECM assumes ha he unde lying
nons a iona y a iables a e coin eg a ed i hey sha e a
common long- un s ochas ic end so ha hei linea com-
bina ion is a s a iona y p ocess. Howe e , i he p esence
o he long- un equilib ium be ween he Russian whea
p ice, he exchange a e, and he wo ld whea p ice is
no con i med by he Johansen es , he uni oo es
may be applied o he e o co ec ion e m e ie ed
om he long- un equilib ium be ween he Russian whea
p ice and he wo ld whea p ice o check o coin eg a-
ion. The e o e, he p esence o a s a iona y e o e m
indica es coin eg a ion be ween wo non-s a iona y p ice
se ies.
Ne e heless, Equa ion (1) shows a ew limi a ions.
Fi s , commodi y p ices usually con ain a uni oo ha
may in alida e econome ic es s. In his case, alidi y o
he model may be checked by he Engle and G ange p o-
cedu e (Engle & G ange , 1987). Fu he mo e, i β2is no
equal o one due o high ans e cos s, p ice di e en-
ials may be g owing, despi e he coin eg a ion o he p ice
se ies. The exis ing li e a u e indica es he weakness o a
non-uni y slope coe icien as he in e p e a ion o p ice
coin eg a ion (Ba es, 1991; Ba es, 2019;Ba e ,1996).
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
390 YUGAY e al.
In his case, p ice di e en ials may be es ed o a uni
oo ins ead:
(𝑃𝑑
𝑡−𝑃
𝑤
𝑡)∼𝐼(0)(3)
The e o e, he e ec o he wa in Uk aine on he ela-
ionship be ween Russian whea p ices and he exchange
a e can be es ima ed wi hin an ECM model wi h p ice
di e en ials in he sho - un dynamics:
Δ𝑃𝑑
𝑡=𝛼
0+𝜌
0(𝑃𝑑
𝑡−1 −𝑃
𝑤
𝑡−1)+𝜌
1Δ𝑃𝑑
𝑡−𝑘 +𝜌
2Δ𝐸𝑅𝑡−1
+𝜌3Δ𝐸𝑅𝑡−1 ∗𝐷
𝑤𝑎𝑟 +𝜌
4Δ𝑃𝑤
𝑡−1 +𝜑
𝑡(4)
whe e (𝑃𝑑
𝑡−1 −𝑃
𝑤
𝑡−1) ep esen s he pa ame e es ima es o
he lagged p ice di e ence be ween he Russian whea
p ice and he wo ld whea p ice. These p ice di e en ials
imply he p esence o an e o co ec ion mechanism in
he amewo k o he Engle-G ange heo em (Engle &
G ange , 1987). Dwa is he dummy a iable o he wa in
Uk aine, aking he alue o 1 a e Feb ua y 24, 2022, and
0 o he wise.
4 PRICE DATA AND TIME SERIES
PROPERTIES
Ou empi ical analysis is based on he weekly p ices o
Russian whea (Ruble/ ) o Classes 3, 4, and 5 o each
o he six whea p oducing egions. Whea o Class 3 is
he mos widely aded ype o whea o human consump-
ion wi hin Russia, whe eas whea o Class 4 is p ima ily
expo ed o he in e na ional ma ke , and whea o Class 5
is used as a eed g ain in Russia.
To explici ly ake in o accoun he possible in luence
o he change o he loa ing exchange a e egime, we
conduc an econome ic analysis o wo sub-pe iods
sepa a ely: he i s subse om Sep embe 12, 2008, o
No embe 7, 2014, and ime pe iod o he second subse
is be ween No embe 14, 2014, and Janua y 27, 2017, co -
esponding o he pe iod wi h a eely loa ing exchange
a e egime a e he abolishmen o he managed exchange
a e.
We conside he ime pe iod om No embe 14, 2014,
o Janua y 27, 2017, as a pe iod o subs an ial de alua-
ion o he Russian Ruble, induced by he plumme ing
wo ld oil p ices in 2014–2015. In o de o educe he impac
o he wo ld oil p ice changes on he Russian economy,
he Russian go e nmen e u ned o he iscal ule a he
end o Janua y 2017. In pa icula , he oil and gas e -
enues ha we e ecei ed in excess o he cu -o p ice on
he wo ld ma ke should be dis ibu ed o he Russian
Na ional Weal h Fund.6On he o he hand, when wo ld
oil and gas p ices a e below he cu -o p ice, he Na ional
Weal h Fund’s e enues should be di ec ed o co e he
budge de ici . The Russian go e nmen p ese ed addi-
ional oil and gas e enues when oil p ices exceeded he
40 USD pe ba el ma k and ca ied ou cu ency pu -
chase/sale ope a ions on he open ma ke . As a esul ,
since Feb ua y 2017, he e has been a no iceable dec ease
in he co ela ion be ween he exchange a e dynamics and
wo ld oil p ices.
Fu he mo e, we build ou analysis o he e ec s o
he Uk aine wa on da a o he ime pe iod No embe
14, 2014 o Sep embe 16, 2022, which includes he ime
pe iod when whea expo s we e s ongly and pe manen ly
es ic ed (Figu e 3, Figu e A1 and Table 1).
Addi ionally, we use milling whea p ices (Eu o/ ) om
F ance (La Pallice) as a co esponding benchma k o Rus-
sian whea p ices. La Pallice is a deep-wa e po in F ance.
The e o e, F ench domes ic whea p ices om La Pal-
lice a e compa able o whea p ices in No h Caucasus,
which has di ec access o he Black Sea po . We u ilize
he Ruble/USD and Eu o/USD as co esponding exchange
a es in ou analysis. The F ench Rouen spo whea
p ice (FOB USD/ ) se es as a co esponding wo ld whea
p ice p o ided by he Ag icul u e and Ho icul u e De el-
opmen Boa d (Figu e A2). We use he s anda d Rouen
whea p ice om he In e na ional G ain Council as a co -
esponding wo ld whea p ice o in es iga e he e ec o
hewa inUk aine
7(Figu e A3). All a iables a e ans-
o med in o na u al loga i hms, and we impu e missing
obse a ions wi h he a e age alues o he p eceding and
succeeding alues.8
We apply he Dickey-Fulle gene alized leas squa es
(GLS) es (Ellio e al., 1996) o check ime se ies
6The s abiliza ion und o he Russian Fede a ion was ounded in 2004.
I was di ided in o he Rese e Fund and he Na ional Weal h Fund in
2008. In 2018, he Rese e Fund became pa o he Na ional Weal h Fund
(Russian Minis y o Finance, 2023).
7The ecen F ench Rouen whea p ice (FOB/USD) is no a ailable on he
AHDB’s websi e.
8F om Sep embe 12, 2008, o No embe 7, 2014, 14 (4.3%) and 32 (9.9%)
p ice obse a ions a e missing o all egional Russian whea p ices
(Classes 3, 4, and 5) and he wo ld whea p ice, espec i ely. F om No em-
be 14, 2014, o Janua y 27, 2017, six (4.3%) p ice obse a ions a e missing
o No h Caucasus, Volga, U als, and Wes Sibe ia and i e (5.1%) obse -
a ions o Black Ea h and Cen al (Classes 3, 4, and 5), whe eas 10
(8.6%) p ice obse a ions a e absen o he F ench Rouen spo whea
p ice om he AHDB. The e a e h ee (0.93%) and wo (0.48%) missing
alues o he Ruble/USD exchange a e o ime pe iod om Sep embe
12, 2008, o No embe 7, 2014, and om No embe 14, 2014, o Sep embe
16, 2022, espec i ely. F om No embe 14 o Sep embe 16, 2022, he e is
one (0.24%) missing obse a ion o he S anda d Rouen whea p ice om
he In e na ional G ain Council.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 391
FIGURE 3 Whea p ices o Class 3 in No h Caucasus and he Ruble/USD exchange a e.
No e: O icially, he Russian go e nmen e u ned o he iscal ule in July 2017. Howe e , he go e nmen has al eady se a cu -o p ice a he end o Janua y
2017.
Sou ce: Russian G ain Union, Cen al Bank Russian Fede a ion, own illus a ion.
TABLE 1 Da a bases o he analyses.
Resea ch ocus
Managed exchange
a e egime
F ee- loa ing
exchange a e egime The wa in Uk aine
Time pe iod F om Sep 12, 2008 o No
7, 2014
F om No 14, 2014 o Jan
27, 2017
F om No 14, 2014 o Sep 16, 2022
Numbe o obse a ions 322 116 410
P ice se ies, Sep 2008 o Sep
2022 Sou ce
Russian whea (Ruble/ ) Russian G ain Union
F ench whea (Eu o/ ) Ag icul u e and Ho icul u e De elopmen Boa d
Wo ld whea (USD/ ) Ag icul u e and Ho icul u e De elopmen Boa d, In e na ional G ain Council
Exchange a e (Ruble/USD) The Cen al Bank o he Russian Fede a ion
Exchange a e (Eu o/USD) Fede al Rese e Sys em (Cen al Bank o he US)
p ope ies. The esul s o he es a e p esen ed in
Tables A1–A6.
5 EMPIRICAL RESULTS
5.1 Tes on coin eg a ion
We apply he coin eg a ion es by Johansen (1995) o Rus-
sian egional whea p ices, he Ruble/USD exchange a e,
and he wo ld whea p ice o he ime pe iod wi h a man-
aged exchange a e egime and a ee- loa ing exchange
a e egime sepa a ely. The exis ence o one common lin-
ea end o all p ice se ies implies ha p ices mus be
coin eg a ed, and he e mus be (n-1) coin eg a ing ec o s,
which is wo in ou case. Fo whea o Classes 3, 4, and 5
in he six di e en egions o Russia, he empi ical esul s
o he coin eg a ion es indica e he absence o wo coin e-
g a ing ec o s be ween he Ruble/USD exchange a e, he
wo ld whea p ice, and he Russian whea p ices du ing
he pe iod wi h he managed exchange a e egime. How-
e e , coin eg a ion be ween he p ice se ies is con i med
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
398 YUGAY e al.
TABLE 7 The e ec o he wa in Uk aine.
P ice se ies P ice di e en ial (ρ0) Exchange a e (ρ2) E ec o he wa (ρ3)Wo ldwhea (ρ4)
Whea o Class 3
No h Caucasus −.07 .13*** −.11*.11***
Black Ea h −.01** .13** −.10 .02
Cen al −.01** .15*** −.13*.03
Volga −.01** .08 −.06 .04
U als −.01** .07 −.02 .01
Wes Sibe ia −.01** .02 .006 .02
Whea o Class 4
No h Caucasus −.01 .17*** −.11 .11***
Black Ea h −.01** .11** −.10 .04
Cen al −.01** .16*** −.16** .02
Volga −.01** .11** −.08 .03
U als −.01*** .06 −.02 .006
Wes Sibe ia −.01** .02 .009 .03
Whea o Class 5
No h Caucasus −.002 .18*** −.10 .09**
Black Ea h −.002 .12** −.11 .03
Cen al −.002 .11** −.09 .006
Volga −.001 .12*** −.09 .04
U als −.001 .09** −.03 −.007
Wes Sibe ia −.002 .04 −.01 .03
No es: E ec o he wa in % calcula ed as pe cen age o pa ame e e ec o he wa (ρ3) o pa ame e o exchange a e (ρ2).
***, **, and * deno e s a is ical signi icance a he 1%, 5%, and 10% le els, espec i ely.
o whea expo es ic ions by Russia, which dec ease
wo ld ma ke p ice ansmission and ensu e ha local
ma ke condi ions (e.g., egional supply and demand) gain
in impo ance is-à- is wo ld ma ke ac o s. Also, la ge
dis ances o he po s and de icien anspo in as uc u e
in Russia may in luence his inding.
Resul s on he impo ance o mac oeconomic condi ions
o domes ic whea p ices in eme ging (Russia) and de el-
oped (F ance) coun ies ha expo whea complemen
insigh s p o ided by Lie e and Pe saud (2009), which
ocused on de eloping coun ies. Mo eo e , ou indings
ega ding exchange a e pass- h ough o domes ic g ain
p ices a e in line wi h Ha zenbuehle e al. (2016), which
iden i ied exchange a e pass- h ough o co n and soybean
p ices in he USA. Howe e , exchange- a e pass h ough
o whea p ices in Tu key was no iden i ied in he s udy
by Nazlioglu and Soy as (2011). This migh indica e ha
exchange a e pass- h ough is mo e impo an o g ain
expo ing coun ies, especially he Uni ed S a es, F ance,
and Russia, han o g ain impo e s such as Tu key. In
addi ion o whea , Bu ako (2016) in es iga ed he Ruble
exchange a e pass- h ough o o he kinds o ag icul u al
commodi ies, ha is, buckwhea , g ain c ops, po a oes,
oa , ye, and ba ley. Conside ing he ime pe iod om
Janua y 1999 o Oc obe 2015, he exis ence o a long- un
ela ionship wi h he Ruble exchange a e is only con-
i med o buckwhea , he only c op among hose ha was
impo ed by Russia.
T ade policies and poo ma ke condi ions cause incom-
ple e exchange a e pass- h ough o domes ic ag icul u al
p ices. These poo ma ke condi ions migh be ela ed
o physical in as uc u e, such as anspo , oad, and
s o age sys ems, o o ins i u ional o comme cial in as-
uc u e, such as sys ems o law, inance, and ma ke
in o ma ion (Lie e & Pe saud, 2009). Mo eo e , spa ial
ma ke e iciency and anspo in as uc u e play an
impo an ole o in e egional ade om su plus egions
o de ici egions (S anidze & Gö z, 2019), especially in he
pe iods o ha es sho alls (S anidze e al., 2021). The e-
o e, exchange a e pass- h ough o whea p ices in emo e
egions could be s eng hened by in es ing in ma ke con-
di ions such as anspo a ion in as uc u e and ma ke
in o ma ion se ices o imp o e hei unc ioning. Sec-
ond, incomple e exchange a e pass- h ough in he closes
egions o he wo ld ma ke migh indica e ma ke powe
o Russian p oduce s and ade s on domes ic ma ke s,
which migh also be connec ed o poo ma ke condi ions
(compa e Sec ion 2).
Thus, he empi ical esul s o ou s udy ha e policy
implica ions o he Russian go e nmen . To mobilize Rus-
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 399
sia’s addi ional unu ilized whea p oduc ion (Schie ho n
e al., 2014; Swinnen e al., 2017) and expo (S anidze &
Gö z, 2019) po en ial, i is impo an o ensu e ha he
exchange a e changes a e la gely ansmi ed o domes-
ic whea p ices in he mos emo e egions o U als and
Wes Sibe ia. The e o e, he unc ioning o he g ain supply
chain should be imp o ed by in es ing in anspo a ion
in as uc u e and ma ke in o ma ion se ices.
Exchange a e pass- h ough is impo an o ensu e ha
he ma ke emains in equilib ium and ha he ma ke
adjus s o mac oeconomic changes o gua an ee e icien
esou ce alloca ion. The e o e, a lowe deg ee o exchange
a e pass- h ough in Russia in compa ison o F ance migh
imply a highe isk o disequilib ium and hus ine icien
esou ce alloca ion. This is pa icula ly ele an o Rus-
sia whe e he Ruble exchange a e a iabili y is highe
compa ed o he Eu o exchange a e in F ance. Conse-
quen ly, domes ic p ices in Russia do no su icien ly adjus
o changes in he exchange a e ma ke , wi h espec i e
consequences o domes ic p oduc ion incen i es, which
migh esul in a la ge a iabili y o expo supply, wi h
possible nega i e consequences o he impo coun ies.
Ou esul s u he e eal ha wi h Russia’s in asion
o Uk aine, he in luence o he exchange a e on Rus-
sian whea p ices has dec eased s ongly. In pa icula , o
whea o Class 3, i has come o a ull s op in he Cen al
egion and become subs an ially inhibi ed in No h Cau-
casus and Cen al. We ace back he weakened in luence
o he exchange a e on domes ic whea p ices in Russia o
he ollowing h ee ac o s: i s , whea expo es ic ions
and he subs an ial inc ease in ansac ion cos s esul ing
om, o example, he inc eased insu ance cos s o ships
in he Black Sea egion due o wa isk and he isk o
impo e s acing seconda y sanc ions, which ha e damp-
ened he in luence o he wo ld ma ke p ice and hus he
exchange a e. Second, he Ruble app ecia ion obse ed
om Ma ch o June 2022 migh ha e been passed h ough
o a lowe deg ee o domes ic whea p ices han a dep e-
cia ion, since his implies he dec ease o he domes ic
p ice le el, which dec eases whea p oduce s’ e enues.14
The e o e, he Russian whea ma ke was on a “wai -and-
see” mode as i was also obse ed on he wo ld ma ke
in he i s mon hs a e he Russian in asion o Uk aine
(Leg and, 2022). And hi d, he in luence o exchange a e
changes on domes ic whea p ices was also dampened by
swi ching o a Ruble-denomina ed expo ax sys em and
he new baseline p ice (15,000 Ruble/ ) a he beginning
o July 2022. Mo e speci ically, when he Ruble app eci-
14 The asymme ic e ec in he Ruble’s exchange a e pass- h ough o Rus-
sian whea p ices, howe e , was no con i med wi hin an ECM model
amewo k and by he Wald es (No embe 14, 2014, o Sep embe 16,
2022). These esul s a e a ailable upon eques .
a es, he size o he expo ax dec eases, coun e ac ing he
nega i e e ec s o he exchange a e app ecia ion on whea
expo sales.15 In con as , when he Ruble dep ecia es, he
15,000 Ruble e e ence p ice exp essed in USD dec eases,
whe eas he co esponding expo ax inc eases, hence
making i “mo e bea able” o Russian whea expo e s o
pay highe axes as he dep ecia ed Ruble has made he
Russian whea mo e compe i i e on he wo ld ma ke . The
lexible expo ax sys em designed as such implies ha he
size o he expo ax adjus s o exchange a e a ia ions,
e en ually ein o cing ha he exchange a e pass- h ough
o domes ic whea p ices in Russia is hampe ed. As a esul
o he combined e ec o hese h ee ac o s, Russian whea
expo s in July and Augus 2022 we e abou 22% lowe in
compa ison o he p e ious yea (Re ini i -Eikon, 2022),
despi e a eco d whea ha es in 2022.
I can be expec ed ha he high Ruble/USD exchange
a e ola ili y will sus ain in he sho - un u u e since
poli ical and hus mac oeconomic isks will emain high
du ing he Uk aine wa . Fo example, addi ional sanc ion
packages implemen ed by wes e n coun ies would ha e
a s eng hening e ec on he Russian Ruble exchange a e
gi en ha hey would ensu e ha Russia’s impo possi-
bili ies would become mo e limi ed. The app ecia ion o
he Russian Ruble would dec ease he compe i i eness o
Russia’s whea expo s o in e na ional ma ke s and would
hus induce dec easing e ec s on Russia’s whea expo s.
Con e sely, i Russian expo s o oil and gas would sh ink,
he Ruble/USD exchange a e would dep ecia e, which
would inc ease whea expo compe i i eness and hus os-
e Russia’s whea expo s. Also, i can be expec ed ha
he la ge dependence o Russia’s economy on oil and gas
expo s will be sus ained, which will con inue o d i e
he Ruble exchange a e ola ili y due o gene ally highly
ola ile wo ld ma ke p ices o oil and gas.
Howe e , i he exchange a e pass- h ough and he in e-
g a ion in wo ld whea ma ke s emain low and i hey
po en ially e en u he dec ease, while he exchange a e
ola ili y emains high, he disin eg a ion o Russia’s g ain
sec o migh ampli y. In a disin eg a ed g ain sec o , wo ld
ma ke p ice de elopmen s a e less ansmi ed o he
domes ic ma ke , such ha incen i es o g ain p oduc-
ion in he medium- un and in es men s in he Russian
g ain sec o in he long- un may weaken, wi h espec i e
nega i e consequences o he whea impo -dependen
coun ies in he Global Sou h.
The isk o disin eg a ion o he Russian whea ma -
ke om in e na ional ma ke s and hus dec eased whea
expo s om Russia coupled by inc eased ola ili y
15 When he Ruble app ecia es, he USD equi alen baseline p ice o
15,000 Ruble/ inc eases, which educes he axable base and, espec-
i ely, he size o expo ax.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
400 YUGAY e al.
p esen s se e al addi ional isks wi h ega ds o Russian
whea expo s since he Uk aine wa . In pa icula , he
isk ha whea expo s become mo e ola ile since ans-
po along he expo supply chain in he Black Sea is
dis up ed due o wa ac i i ies, o example a acks on
po in as uc u e acili ies. Also, he e is a isk ha Rus-
sian whea expo s could dec ease empo a ily due o an
inc ease o he pe manen whea expo ax le el. Also,
he go e nmen migh again impose a minimum whea
expo p ice, as ecen ly ied o whea ende expo s,
which migh educe he demand o Russian whea . Fu -
he , he e is also a isk ha whea expo scould be educed
due o a educ ion o ship anspo capaci y ollowing
he exclusion o mul ila e al whea expo companies om
he Russian g ain sec o ha play a la ge ole in he
o ganiza ion o he sea anspo o g ains. Mo eo e , he e
is e en a isk ha g ain expo businesses ollow economic
ules less bu a he geopoli ical aims o he go e nmen ,
he p ima y o which is inc easing i s in luence o he
managemen o he Russian expo companies. In o de o
s eng hen ade esilience o he highly impo -dependen
coun ies in he Global Sou h, si ua ions o a high depen-
dence on whea impo s om Russia should be dec eased
by ade di e si ica ion beyond he Black Sea egion.
To inc ease ood a ailabili y in he MENA egion, which
is he main des ina ion o Russian whea expo s, bu e
s ocks migh be an e ec i e policy measu e o mi iga ing
nega i e consequences o p ice shocks in imes o mac oe-
conomic ins abili y and ola ile g ain p ices. Fu he mo e,
go e nmen s should p o ide ood aid and inancial ans-
e s (Be nd e al., 2022) o ulne able households. La son
e al. (2014) a gue ha s a egic whea ese es can be
e ec i e in mi iga ing p ice ola ili y in he MENA egion,
bu a ge ed ans e s o ulne able households migh be a
mo e e icien policy measu e. In he con ex o he cu en
ood c isis, he go e nmen o Egyp opened i s s a egic
whea s ocks and expanded social secu i y p og ams o
p o ec ulne able low-income popula ions (Abay e al.,
2023). Also, inc easing local whea p oduc ion migh u -
he di e si y isks. Howe e , hose measu es a e no ee
o cos s, and migh inc ease ood p ices, and hus measu es
o inc ease supply chain esilience need o be well balanced
o ac ually imp o e ood secu i y.
ACKNOWLEDGMENTS
Open access unding enabled and o ganized by P ojek
DEAL.
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SUPPORTING INFORMATION
Addi ional suppo ing in o ma ion can be ound online
in he Suppo ing In o ma ion sec ion a he end o his
a icle.
How o ci e his a icle: Yugay, S., Gö z, L., &
S anidze, M. (2024). Impac o he Ruble exchange
a e egime and Russia’s wa in Uk aine on whea
p ices in Russia. Ag icul u al Economics,55,
384–411. h ps://doi.o g/10.1111/agec.12822
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 403
Appendix A
Time se ies p ope ies
Resul s o he GLS and Phillips-Pe on (PP) uni oo es s wi h cons an and end as well as wi hou end sugges ha all
p ice se ies a e non-s a iona y a 5% du ing he managed exchange a e egime (Tables A1 and A2). Fu he mo e, esul s
o he es s show ha all p ice se ies a e s a iona y a i s di e ences. Resul s o he es s indica e ha p ice se ies in le els
a e s a iona y in se e al cases du ing he ee- loa ing exchange a e egime (Tables A3 and A4).
Howe e , he GLS es esul s wi h p ice se ies in he i s di e ences show ha all p ice se ies a e s a iona y a he
5% signi icance le el, excep o whea p ices o Classes 3 and 4 in Wes Sibe ia du ing he ee- loa ing exchange a e
egime. The PP es esul s wi h p ice se ies in he i s di e ences show ha all p ice se ies a e s a iona y. Finally, esul s
o uni oo es s wi h cons an and ends o he ime pe iod No embe 14, 2014, o Sep embe 16, 2022 show s a iona i y
o p ice se ies in se e al cases. The es esul s wi h p ice se ies in i s di e ences e eal ha all p ice se ies a e s a iona y
(Table A5 and A6); we he e o e conclude ha all a iables a e in eg a ed o o de one.
FIGURE A1 Whea p ices o Class 4 and Ruble/USD exchange a e.
Sou ce: Russian G ain Union, he Cen al Bank o Russian Fede a ion, own illus a ion.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
404 YUGAY e al.
FIGURE A2 Whea p ices o Class 3 and he wo ld whea p ice.
No e: he e ical line co esponds o he change in he exchange a e egime in Russia.
Sou ce: Russian G ain Union, Ag icul u e and Ho icul u e De elopmen Boa d (AHDB), own illus a ion.
FIGURE A3 Whea p ices o Class 3 and he wo ld whea p ice.
Sou ce: Russian G ain Union, In e na ional G ain Council, own illus a ion.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 405
TABLE A1 DF-GLS uni oo es (managed exchange a e egime).
Cons an and end Cons an 1s di e ence
P ice se ies
Speci ica ion
(lag leng h)
Tes
s a is ic
Speci ica ion
(lag leng h)
Tes
s a is ic
Speci ica ion
(lag leng h)
Tes
s a is ic
Sep 12, 2008–No 7, 2014
Whea o Class 3
No h Caucasus 1 −2.40 1 −1.45 0 −9.32***
Black Ea h 1−2.53 1−1.90*0−7.39***
Cen al 1 −2.38 1 −1.75*0−7.94***
Volga 2−2.39 2−1.79*1−6.95***
U als 2 −2.51 2 −1.98** 1−5.77***
Wes Sibe ia 2−2.28 2−1.86*1−5.82***
Whea o Class 4
No h Caucasus 1−2.83*1−1.52 0−7.29***
Black Ea h 1 −2.85*1−1.68*0−6.32***
Cen al 1−2.44 1−1.44 0−8.13***
Volga 2 −2.59 2 −1.61 1 −6.74***
U als 2−2.55 2−1.91*1−5.44***
Wes Sibe ia 2 −2.06 1 −1.43 1 −5.88***
Whea o Class 5
No h Caucasus 1 −2.57 1 −1.14 0 −8.92***
Black Ea h 2−2.73*2−.95 1−6.25***
Cen al 1 −2.55 1 −.88 0 −7.66***
Volga 3−2.47 3−.86 2−6.80***
U als 2 −2.53 2 −1.68*1−5.62***
Wes Sibe ia 2−2.22 2−1.72*1−5.89***
Exogenous a iables
Exchange a e
(USD/Ruble)
2−1.46 21.19 1−7.23***
Wo ld whea 1 −1.51 1 −1.51 0 −14.97***
Abb e ia ion: DF-GLS, Dickey-Fulle gene alized leas squa es.
***, **, and * deno e s a is ical signi icance a he 1%, 5%, and 10% le els, espec i ely.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
406 YUGAY e al.
TABLE A2 Phillips-Pe on uni oo es (managed exchange a e egime).
Cons an and end Cons an 1s di e ence
P ice se ies
Speci ica ion
(lag leng h)
Tes
s a is ic
Speci ica ion
(lag leng h)
Tes
s a is ic
Speci ica ion
(lag leng h)
Tes
s a is ic
Sep 12, 2008–No 7, 2014
Whea o Class 3
No h Caucasus 6 −2.86 6 −1.31 9 −9.03***
Black Ea h 10 −2.66 10 −1.50 7−7.31***
Cen al 10 −2.60 10 −1.49 3 −8.01***
Volga 10 −2.50 10 −1.52 4−10.00***
U als 12 −2.39 12 −1.76 7 −8.36***
Wes Sibe ia 11 −2.33 11 −1.56 6−8.96***
Whea o Class 4
No h Caucasus 6−3.02 6−1.44 10 −8.37***
Black Ea h 10 −2.52 10 −1.48 7 −6.72***
Cen al 10 −2.45 10 −1.45 1−8.07***
Volga 11 −2.48 10 −1.49 7 −10.44***
U als 12 −2.37 12 −1.71 9−8.93***
Wes Sibe ia 11 −2.27 11 −1.52 7 −9.59***
Whea o Class 5
No h Caucasus 7 −2.58 7 −1.33 10 −8.75***
Black Ea h 11 −2.28 11 −1.46 5−9.66***
Cen al 11 −2.30 11 −1.48 3 −8.35***
Volga 10 −2.23 10 −1.48 1−8.71***
U als 12 −2.40 12 −1.68 10 −10.00***
Wes Sibe ia 12 −2.38 12 −1.59 10 −9.98***
Exogenous a iables
Exchange a e
(USD/Ruble)
10 −1.47 9−.70 8-13.37***
Wo ld whea 6 −1.68 6 −1.59 2 −14.92***
***, **, and * deno e s a is ical signi icance a he 1%, 5%, and 10% le els, espec i ely.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
YUGAY e al. 407
TABLE A3 DF-GLS uni oo es ( ee- loa ing exchange a e egime).
P ice se ies Cons an and end Cons an 1s di e ence
Speci ica ion
(lag leng h)
Tes
s a is ic
Speci ica ion
(lag leng h)
Tes
s a is ic
Speci ica ion
(lag leng h)
Tes
s a is ic
No 14, 2014–Jan 27, 2017
Whea o Class 3
No h Caucasus 1 −2.36 1 −1.97** 1−2.70***
Black Ea h 1−3.28** 1−2.27** 0−2.78***
Cen al 1 −3.15** 1−2.16** 0−2.89***
Volga 4−2.68 4−1.42 1 −2.15**
U als 1 −2.00 1 −1.60 1 −3.58***
Wes Sibe ia 1−2.42 1−1.98** 1−1.46
Whea o Class 4
No h Caucasus 1−2.47 1−2.29** 0−3.03***
Black Ea h 1 −2.45 1 −2.15** 0−2.36**
Cen al 1−2.23 1−1.96** 0−3.75***
Volga 1 −1.61 1 −1.40 1 −2.44**
U als 1−1.56 1−1.30 1−3.09***
Wes Sibe ia 1 −2.73*1−2.36** 0−3.69***
Whea o Class 5
No h Caucasus 2 −2.79*2−2.59*** 1−3.09***
Black Ea h 1−2.23 1−2.00** 0−3.39***
Cen al 1 −2.09 1 −1.89*0−3.45***
Volga 1−1.71 1−1.53 1−2.14**
U als 2 −1.43 2 −1.40 2 −1.81*
Wes Sibe ia 1−2.37 1−2.06** 1−1.78*
Milling whea , F ance
La Pallice 0−1.68 0−1.10 0−10.63***
Exogenous a iables
Exchange a e
(Ruble/USD)
1−1.56 1−.88 2−3.87***
Exchange a e
USD/Eu o
2−1.51 2 −.17 1 −8.02***
Wo ld whea 0−1.97 0−.90 0−11.31***
Abb e ia ion: DF-GLS, Dickey-Fulle gene alized leas squa es.
***, **, and * deno e s a is ical signi icance a he 1%, 5%, and 10% le els, espec i ely.
15740862, 2024, 2, Downloaded om h ps://onlinelib a y.wiley.com/doi/10.1111/agec.12822, Wiley Online Lib a y on [20/03/2024]. See he Te ms and Condi ions (h ps://onlinelib a y.wiley.com/ e ms-and-condi ions) on Wiley Online Lib a y o ules o use; OA a icles a e go e ned by he applicable C ea i e Commons License
