Price Discrimination in Russian Wheat Exports: Evidence from Firm‐level Data

Abstract

Russia emerged as an important wheat exporter in recent years raising the question of how this will affect international wheat markets. In particular developing countries -the main destination of Russian wheat exports -could be harmed by aggressive pricing behaviour. This article analyses the exertion of price discrimination by Russian wheat exporting firms based on Krugman's pricing-to-market hypothesis. We apply Knetter's panel model to a firm-level dataset and find evidence for pricediscriminating behaviour by Russian firms in 25 out of 61 destination countries over the period 2002-2011.

Are We Moving Towards Functioning Agricultural Markets and Trade Relations?

“…An issue not addressed directly in this special feature is the distribution of benefits from functioning trade (although Baffes and Haniotis indicate clear distributional implications as theoretically expressed in the Prebisch-Singer hypothesis). Distributional issues between sellers, buyers and non-participants are often of particular political concern, and prompt policies which often have unanticipated or undesirable effects (as illustrated by Uhl et al, 2016). Distributional issues are frequently discussed in contexts of market power but arise more generally through structural change both within industries and international trade patterns and globalisation.…”

“…Moreover, the results reveal a long-term deterioration of the sectoral terms of trade in agriculture, consistent with the Prebisch-Singer hypothesis. Uhl et al (2016) also address price formation but have a more specific focus: they analyse the pricing behaviour of Russian grain exporters during the onset of recent developments of political polarisation and dislocations in commodity price ratios. They focus specifically on Russia, which has emerged as an important wheat exporter in recent years while the Russian wheat export market is also highly concentrated.…”

Pricing‐To‐Market Analysis: The Case of EU Wheat Exports

“…Similarly, Uhl et al . () based their PTM analysis of Russian wheat exports on Knetter's panel model, conducting the analysis for two time periods, i.e. 2002–2011 and 2006–2011 (with high world wheat prices) using a firm‐level dataset.…”

“…The total value of wheat exports in 2011 amounted to $US 47.4 billion (IGC, ). Wheat is thus a strategically important commodity for which trade is politically sensitive, particularly for those importing countries where it is a staple food, and price volatility may make them more vulnerable to social unrest (Uhl et al ., ). Price discrimination may add to this, and the concentration of world wheat trading in the hands of a few multinational firms (e.g.…”

“…Price discrimination may add to this, and the concentration of world wheat trading in the hands of a few multinational firms (e.g. the ABCD companies ) and State Trading Enterprises increases the probability of discrimination between destination markets (Scoppola, ; Uhl et al ., ). Recent instability in trade and prices has raised ‘a number of research questions about current and future competition and price‐setting behaviour in the world wheat market’ (Pall et al ., ), but there is little evidence on pricing strategies.…”