Effect of Grain Corridor Agreement on Grain Prices

Abstract

This study investigates the impact of the Grain Corridor Agreement (GCA), particularly in the aftermath of the Russia–Ukraine conflict, on the prices of major grains (wheat, maize, and barley), pivotal for global sustenance. By delineating three significant shocks: the initiation of the conflict, the enforcement of the GCA, and Russia's subsequent withdrawal from it, we employ an Integrated GARCH (IGARCH) model to investigate the impact of the Russia–Ukraine conflict on grain prices. Our empirical findings reveal that all grain prices surged at the onset of the conflict, with barley experiencing the most pronounced increase. Additionally, volatility escalated across all grain prices during the conflict's inception, albeit subsiding upon the implementation of the GCA. Price volatility spiked initially but decreased with the GCA's enforcement. The evidence suggests that the conflict is driving up world grain prices and causing global vulnerability, and that conciliatory policies such as the GCA offer a short-term solution. However, long-term strategies should focus on reducing external dependence by reviewing agricultural policies and promoting domestic production. Moreover, policymakers are advised to consider both domestic and global market vulnerabilities when designing sound policies. Highlights International grain prices (wheat, maize and barley) spiked during the onset of the ongoing Russia–Ukraine conflict. The conflict triggered an international response to resume safe maritime humanitarian transportation of agricultural grains via GCA. We develop an empirical framework to assess the impact of the Russia–Ukraine conflict on grain prices. Empirical findings indicate that Russia–Ukraine conflict increased all grain prices.