Russia’s growing wheat export business: What drives export growth, trade stability and pricing strategies?

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In the last two decades, Russia has expanded its wheat export business replacing the US as the world’s largest wheat exporter. Despite the circumstances related to the invasion of Russian forces in Ukraine, it is forecasted that Russia will remain a dominant supplier of wheat to the world market. Russia’s wheat trade pattern is expected to sustain and wheat deliveries intended for the highly import depending countries in the South, while competing with the Western exporters on the world market. There is a lack of empirical research on Russian wheat trade, although the country is shaping the international wheat trade system. Especially, Russia has frequently restricted its wheat exports which has reduced wheat availability on international markets and exacerbated price increases. Moreover, the number of exporting firms involved in Russia’s wheat export business has increased with the importance of Russian firms rising vis-à-vis multinational companies. The existing literature on Russia’s wheat trade builds on “traditional” trade and industrial organization theories using aggregated country-level data. Thus, the role of heterogeneity of trade companies, for example in firm size and degree of vertical integration, for trade performance is not considered yet. This project aims to empirically assess the Russian wheat export business in the context of global food security. The analyzes are based on Melitz's "New" New Trade Theory (NNTT) and focus on firm differences to explain trade relations and its determining factors. Unique transaction-specific firm-level customs data on Russia’s wheat export provide the opportunity to investigate Russia’s international wheat trade relations in the context of the NNTT. The project will investigate Russia’s trade performance in terms of three interrelated aspects: export growth, trade stability and pricing strategy. The econometric analyses will be conducted by gravity, duration and pricing-to-market models. Since studies on food security related to supply-side conditions are rare, the contribution of Russia’s wheat trade to food security in import countries will be examined within a trade-related food security index. The project therefore expands the application of the NNTT towards trade of agricultural commodities and transfers the Melitz approach to pure trading companies. Furthermore, the study is unique by addressing potential interdependencies between export growth, trade stability and pricing strategy by combining the three single equation models in a simultaneous equations system, which has not been applied in the context of agricultural trade before. From a policy perspective, the project will contribute to the UN’s Sustainable Development Goal of eliminating malnutrition and hunger. Finally, the project work will provide insights in designing general export-led growth strategies, valuable for countries which aim to develop their agricultural export sector.