Time-Varying Integration of Ukrainian Sunflower Oil Market with the EU Market

Mariusz HamulczukOksana MakarchukTetyana Kuts

DOI 10.7160/aol.2021.130304
No 3/2021, September
pp. 35-47

Hamulczuk, M., Makarchuk, O. and Kuts, T. (2021) “Time-Varying Integration of Ukrainian Sunflower Oil Market with the EU Market", AGRIS on-line Papers in Economics and Informatics, Vol. 13, No. 3, pp. 35-47 . ISSN 1804-1930. DOI 10.7160/aol.2021.130304.

Abstract

Ukraine (UA) is one of the world-leading countries in sunflower oil production and sunflower oil exports. Due to the increasing demand caused by biofuel regulations, the European Union (EU) remains the key importer of Ukrainian sunflower oil. Therefore, the aim of the proposed research is to provide an evaluation of the time-varying integration of the UA sunflower oil market with the EU market. To fulfill this goal, first, the trends in sunflower oil production and exports in Ukraine as well as trade regulations are presented. The market integration was assessed using the ARDL-ECM approach that was applied to weekly sunflower oil prices in the period from 2000 to 2020. The analytical study was supplemented with the Toda-Yamamoto (T-Y) Granger causality test, the Bai-Perron multiple structural breakpoint test (B-P) as well as impulse response functions (IRF). This study and the obtained results for the whole sample confirm the presence of a long-run relationship between EU and UA prices. The EU prices are the Granger cause for UA prices, as it is shown in the T-Y test. The Bai-Perron test indicates the existence of multiple structural breaks that can be justified by the market condition and policy modifications. Both the long- and the short-run response of UA prices to changes in EU prices vary significantly in different sub-periods.

Keywords

Sunflower oil prices, spatial market integration, ARDL model, Ukraine, European Union.

References

  1. Bai, J. and Perron, P. (2003) "Computation and analysis of multiple structural change models", Applied Economics, Vol. 18, No. 1, pp. 1-22. E-ISSN 1099-1255. DOI 10.1002/jae.659.
  2. Bakucs, Z., Benedek, Z. and Fertő, I. (2019) "Spatial price transmission and trade in the European dairy sector", AGRIS on-line Papers in Economics and Informatics, Vol. 11, No. 2, pp. 13-20. ISSN 1804–1930. DOI 10.7160/aol.2019.110202.
  3. Barrett, C. B. and Li, J. R. (2002) "Distinguishing between Equilibrium and Integration in Spatial Price Analysis", American Journal of Agricultural Economics, Vol. 84, No. 2, pp. 292-307. ISSN 1804-1930. DOI 10.1111/1467-8276.00298.
  4. Barsuk, Y. V. (2017) "Сучасний стан розвитку виробництва та експорту соняшникової олії в Україні. [Online]. Available: http://global-national.in.ua/issue-16-2017/24-vipusk-16-kviten-2017-r/2877-barsuk-yu-v-suchasnij-stan-rozvitku-virobnitstva-ta-eksportu-sonyashnikovoji-oliji-v-ukrajini [Accessed: 06 Oct. 2020]. (In Ukrainian).
  5. Bouët, A., Estrades, C. and Laborde, D. (2012) "Differential Export Taxes along the Oilseeds Value Chain: A Partial Equilibrium Analysis", IFPRI Discussion Paper 01236, pp. 32. [Online]. Available: https://www.ifpri.org/publication/differential-export-taxes-along-oilseeds-value-chain-partial-equilibrium-analysis [Accessed: 10 Sept. 2020]. DOI 10.2139/ssrn.2197456.
  6. Braha, K., Rajčániová, M., Qineti, A., Pokrivčák, J. and Lazorčáková, E. (2019) "Evidence of Spatial Price Transmission in the Case of Kosovo", AGRIS on-line Papers in Economics and Informatics, Vol. 11, No. 1, pp. 3-15, ISSN 1804-1930. DOI 10.7160/aol.2019.110101.
  7. Brown, R. L., Durbin, J. and Evans, J. M. (1975) "Techniques for Testing the Constancy of Regression Relationships over Time", Journal of the Royal Statistical Society, Series B (Methodological) 37, No. 2, pp. 149-92. ISSN 0964-1998. DOI 10.1111/j.2517-6161.1975.tb01532.x.
  8. Comtrade (2020) "UN Comtrade Database". [Online]. Available: https://comtrade.un.org/ [Accessed: 20 Nov. 2020].
  9. Conforti, P. (2004) "Price transmission in selected agricultural markets", FAO commodity and trade policy research working paper No. 7, pp. 92.
  10. NewClimate Policy Database (2015) "Directive (EU) 2015/1513 of the European Parliament and of the Council of 9 September 2015" [Online]. Available: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32015L1513 [Accessed: 06 Oct. 2020].
  11. Fackler, P. L. and Goodwin, B. K. (2001) "Spatial price analysis", Handbook of Agricultural Economics, Vol. 1, Part 2, pp. 971-1024. ISSN 1574-0072. DOI 10.1016/S1574-0072(01)10025-3.
  12. Götz, L., Qui, F., Gervais, J.-P. and Glauben, T. (2016) "Export Restrictions and Smooth Transition Cointegration: Export Quotas for Wheat in Ukraine", Journal of Agricultural Economics, Vol. 67, No. 2, pp. 398-419. E-ISSN 1477-9552. DOI 10.1111/1477-9552.12149.
  13. Goychuk, K. and Meyers, W. H. (2014) "Black Sea and World Wheat Market Price Integration Analysis", Canadian Journal of Agricultural Economics, No. 62, pp. 245-261. E-ISSN 1744-7976. DOI 10.1111/cjag.12025.
  14. Hamulczuk, M., Makarchuk, O. and Sica, E. (2019) "Searching for market integration: evidence from Ukrainian and European Union rapeseed markets", Land Use Policy, Vol. 87, pp. 11. ISSN 0264-8377. DOI 10.1016/j.landusepol.2019.104078.
  15. Kretschmer, B., Bowyer, C. and Buckwell, A. (2012) "EU biofuel use and agricultural commodity prices: a review of the evidence base", Report of the Institute for European Environmental Policy (June), pp. 1-66. [Online]. Available: https://ieep.eu/publications/biofuels-and-agricultural-commodity-prices-a-review-of-the-evidence-base [Accessed: 03 Aug. 2020].
  16. Kuts, T. and Makarchuk, O. (2020) "Ukrainian Sunflower Market on the Background of EU and US Markets", Problems of World Agriculture, Vol. 20, No. 3, pp. 4-15. E-ISSN 2544-0659, ISSN 2081-6960. DOI 10.22630/PRS.2020.20.3.13.
  17. Listorti, G. and Esposti, R. (2012) "Horizontal price transmission in agricultural markets: fundamental concepts and open empirical issues", Bio-based and Applied Economics, Vol. 1, No. 1, pp. 81-96. E-ISSN 2280-6172. DOI 10.13128/BAE-10769.
  18. Marwa, T., Bashir, A., Azwardi, U., Adam, M. and Thamrin, K. M. H. (2017) "Market Integration of Agricultural Products", International Journal of Economics and Business Administration, Vol. 5, No. 2, pp. 69-82. ISSN 2241-4754. DOI 10.35808/ijeba/130.
  19. OECD/FAO (2020) "OECD-FAO Agricultural Outlook 2020-2029", FAO, Rome/OECD Publishing, Paris. DOI 10.1787/1112c23b-en.
  20. Pesaran, M. H., Shin, Y. and Smith, R. J. (2001) "Bounds Testing Approaches to the Analysis of Level Relationships", Journal of Applied Econometrics, Vol. 16, pp. 289-326. E-ISSN 1099-1255. DOI 10.1002/jae.616.
  21. Potori, N. and Józsa, M. (2014) "Do Black Sea maize prices influence maize futures price discovery in Hungary? An analysis of the relationship between Hungarian and Black Sea maize prices", Studies in Agricultural Economics, Vol. 116, pp. 148-152. E-ISSN 2063-0476, ISSN 1418-2106. DOI 10.7896/j.1417.
  22. Rapsomanikis, G., Hallam, D. and Conforti, P. (2006) "Market integration and price transmission in selected food and cash crop markets of developing countries: review and applications", In: "Agricultural Commodity Market and Trade: New Approaches to Analyzing Market Structure and Instability", eds. A. Sarris and D. Hallam, FAO and Edward Elgar, Cheltenham, pp. 187-217. UK. ISBN-13: 978-1845424442.
  23. Shmygol, N., Antoniuc, A. and Anikieieva, D. (2013) "Експортне мито в Україні. Причини використання та наслідки", Держава і регіони, Vol. 4, No. 73, pp. 16-21. E-ISSN 2707-0719, ISSN 1814-1161. (In Ukrainian).
  24. Shpychak, O., Lupenko, Y. O., Bodnar, O. V., Kuts, T., Parhomenko, L., Didenko, N., Komarnitska, O. and Seperovych, N. (2015) "Аналіз поточної кон’юнктури і прогноз ринків рослинницької продукції в Україні та світі", monograph, "ІАЕ", pp. 337. (In Ukrainian).
  25. Svanidze, M. and Götz, L. (2019) "Spatial market efficiency of grain markets in Russia: Implications of high trade costs for export potential", Global Food Security, Vol. 21, pp. 60-68. ISSN 2211-9124. DOI 10.1016/j.gfs.2019.07.004.
  26. Toda, H. Y. and Yamamoto, T. (1995) "Statistical Inference in Vector Autoregressions with Possibly Integrated Processes", Journal of Econometrics, Vol. 66, pp. 225-250. ISSN 0304-4076. DOI 10.1016/0304-4076(94)01616-8.
  27. Tulush, L. and Hryshchenko, D. (2018) "Fiscal regulation of oilseed market development in Ukraine", Ekonomika APK, No. 5, рp. 63-76. ISSN 2413-2322.
  28. USDA-FAS (2020) "Global Agricultural Information Network Report, 2000-2020". [Online]. Available: https://gain.fas.usda.gov/#/ [Accessed: 25 Sept. 2020].
  29. Zilberman, D., Hochman, G., Rajagopal, D., Sexton, S. and Timilsina, G. (2013) "The Impact of Biofuels on Commodity Food Prices", American Journal of Agricultural Economics, Vol. 95, No. 2, pp. 275-281. E-ISSN 1467-8276. DOI 10.1093/ajae/aas037.

Full paper

  Full paper (.pdf, 906.32 KB).