Short- and long-run relationships between Ukrainian barley and world feed grain export prices

Over the past decade, Ukraine has become an important player in the international feed grain market. From 2004/05 to 2012/13 it exported on average 25 percent of the total world barley annually, less than a percent lower than the largest barley exporter in the world - Australia. This research summarizes the short- and long-run barley price dynamics between Ukraine, and other major barley exporters - Australia, European Union (EU), and Canada – from 2004 to 2010. We also include U.S. corn prices to check if there is any long-run relationship between these two feed grain prices. Tests of market price cointegration (Johansen ML test and residual-based tests) and threshold error correction techniques were performed for this purpose. The results suggest that the cointegrated pairs of prices are Ukraine-Australia, Ukraine-France, Australia-Canada, and Australia-France. The estimated long-run barley price transmission elasticity is 0.71 between Ukrainian and French (a representative country of the EU) barley prices, 0.59 between Australian and Ukrainian barley prices, 0.54 between Canadian and Australian barley prices, and 0.57 between Australian and Canadian barley prices. We also found the short-term relationships between the cointegrated prices to be statistically significant. Moreover, Ukrainian barley prices were found to be weakly exogenous with regards to the Australian and French barley prices in the analyzed period, while Australian barley price is weakly exogenous with regards to the French barley price. Price adjustments in all cointegrated price series were found to be symmetric.