Spatial Integration and Price Volatility of Russian Regional Wheat Markets

Russian agriculture has seen substantial changes since the breakup of the Soviet Union. This paper studies the spatial integration and price volatility of the Russian wheat markets. Despite the vast distances between regions the results do not show significant price variations between regions. Using Generalized Autoregressive Conditional Heteroskedastic (GARCH) models, the effect of Russian government interventions on the wheat price volatility are tested. Results indicate that the 2004 intervention had a significant positive impact on the price volatility, while 2005 intervention did not have any significant effect. Overall price volatility of the Russian wheat prices are significantly greater than that of similar grade wheat prices in the U.S. Correlations between the Russian and U.S. wheat prices shows a mostly negative correlation between the two, which can be attributed to government policies