Akademik Veri Yönetim Sistemi
2024 Agricultural & Applied Economics Association (AAEA) Annual Meeting, Louisiana, Amerika Birleşik Devletleri, 28 - 30 Temmuz 2024
International
Wheat Trade and Spatial Market Integration in the Black Sea Region
Introduction
Spatial market analysis, a critical tool for
understanding the dynamics of trade and price relationships, hinges on three
types of data: prices, transaction costs, and trade volumes. The existing
literature has largely used the price data observed in origin and destination
locations, typically assuming a continuum of trade that overlooks the intermittent
nature of real-life trading activities (Fackler and Goodwin, 2001; Fackler and Taştan, 2008; Taştan and Köprücü,
2023). Following Barrett (1996), we argue that accurate market
analysis should account for transaction costs and trade volumes in addition to
price data. In addition, the notions of market integration and competitive
market equilibrium should be distinguished. Market integration is characterized
by the ability to trade seamlessly between markets, while competitive market
equilibrium occurs when markets are so efficient that no arbitrage
opportunities exist. This nuanced approach acknowledges that markets are often
imperfectly integrated, with trade barriers and transaction costs impeding the equalization
of prices, and that markets may also become segmented because of high transaction
costs or regulatory barriers. The motivation for this study arises from the
need to address the intermittency of trade, which is particularly pronounced in
strategic commodity markets such as wheat markets in the Black Sea region. While Russia holds a leading position in wheat exports, it
frequently imposes unexpected trade barriers in this region.
Objectives
The primary objective of this study is to
evaluate the degree of market integration and the dynamics of competitive
market equilibrium between Türkiye and the Black Sea wheat exporters, namely
Russia, Ukraine, and Kazakhstan. Leveraging the theoretical underpinnings of
Barrett's (1996) model, this research aims to discover the extent to which
transaction costs and discontinuous trade flows affect market efficiency.
In
light of recent geopolitical events that have introduced significant volatility
into global wheat markets, this study also seeks to quantify the effect of
unpredictable trade policies, such as Russia's export bans, on the spatial
market efficiency of these nations and the resulting implications for global
food security.
To
our knowledge, this study is the first analysis of wheat market integration
between Türkiye and its Black Sea neighbors, providing a novel empirical
perspective on a region critical to global wheat supply. In addition, by
employing Barrett and Li's (2002) augmented switching regime model, this study
diverges from traditional spatial price analyses to reveal a more complex
picture of market behaviors and trade inefficiencies. Finally, the study improves our understanding of the role that Russia,
Ukraine, Kazakhstan, and Türkiye play for the future global food security.
Methodology and Data
We adopt an econometric methodology that
builds upon the Parity Bounds Model (PBM) and the augmented switching regime
(SR) models developed by Spiller and Huang (1986) and Barrett and Li (2002).
Our approach is to estimate the joint probability distribution of price
differences and trade volumes, applying maximum likelihood estimation of a
mixture distribution model. This allows us to capture the four market
conditions—perfect integration, segmented equilibrium, imperfect integration,
and segmented disequilibrium—within a comprehensive framework that also
considers discontinuous trade flows and nonstationary price series. This
approach, a notable departure from traditional methods, allows us to capture
the dynamics of market integration and competitive market equilibrium more
accurately. Specifically, the model allows for trade between markets to not be
a continuous flow but subject to interruptions. This is particularly relevant
when analyzing the wheat trade among Türkiye, Russia, Ukraine, and Kazakhstan,
where Russian trade policies, including export bans and unexpected taxes,
exemplify the kind of market disruptions that can occur.
Our
dataset includes monthly observed wheat prices and trade flows in Türkiye
spanning from January 1994 to December 2022, derived from the Turkish
Statistical Institute (TurkStat) database of agricultural product prices. The
timeframe was selected based on the extent of data availability within
TurkStat's records. Additionally, we sourced monthly Free On Board (FOB) wheat
prices and volumes for Russia, Ukraine, and Kazakhstan from the APK-Inform
agency. The respective data coverage for each country is as follows: Russia
from October 2006 to December 2022, Ukraine from January 2000 to December 2022,
and Kazakhstan from June 2011 to December 2022.
Preliminary Findings and Discussion
Preliminary analysis indicates that the
traditional assumption of continuous trade does not hold, which has significant
implications for the measurement of market integration and efficiency. Our
results suggest the presence of imperfect integration between Türkiye and the
Black Sea wheat exporters, with policy fluctuations in Russia contributing to
the observed inefficiencies. The study’s findings offer fresh perspectives on
the role of these nations in maintaining global food security amid changing
agricultural policies and trade agreements. We discuss the implications of our
findings for a potentially reinstated Black Sea Grain Corridor Agreement
between Russia and Türkiye, which is being closely monitored by the public due
to its direct impact on global food security. By including trade volume data
and analyzing its interaction with prices and underlying transaction costs,
this study provides a nuanced understanding of market behaviors, contributing a
significant piece to the understanding of global wheat trade.
References
Barrett, C. B. (1996). Market analysis
methods: are our enriched toolkits well suited to enlivened markets? American
Journal of Agricultural Economics, 78(3), 825–829. https://doi.org/10.2307/1243313.
Barrett, C. B., and Jau Rong Li. 2002.
“Distinguishing between equilibrium and integration in spatial price analysis”.
American Journal of Agricultural Economics. 84(2): 292–307. https://doi.org/10.1111/1467-8276.00298.
Fackler, P. L., & Goodwin, B. K. (2001).
Spatial price analysis. In Handbook of Agricultural Economics. B. Gardner, G.
Rausser, (Eds.) Elsevier.
Fackler, P. L., & Taştan, H. (2008).
Estimating the degree of market integration. American Journal of Agricultural
Economics, 90(1), 69–85. https://doi.org/10.1111/j.1467-8276.2007.01058.x.
Taştan, H., & Köprücü, Y. (2023).
Examining spatial market efficiency under different marketing regulations: The
case of Turkish lemon markets. Agricultural Economics.