Wheat price dynamics in Hungary: Resilience to shocks

Abstract

This study investigates the impact of recent global disruptions, focusing on the Covid-19 pandemic and the ongoing Ukraine-Russia war, on Hungary's wheat-flour supply chain, with a focus on price transmission and market integration. While much research has explored food supply chain disruptions and rising prices globally, there has been limited analysis of their effects on Central and Eastern European agricultural markets, particularly Hungary. This study fills that gap by using linear and non-linear cointegration approaches to examine price relationships along the wheat supply chain. Causality tests indicate a strong bidirectional relationship between producer and consumer prices, demonstrating a tightly integrated market. Cointegration analysis reveals a long-term equilibrium between these prices, with no significant structural breaks during either the pandemic or the Ukraine war. Despite short-term price asymmetries, the study finds that producer-level price changes are ultimately transmitted to consumer prices in the long run, offering insights into Hungary's unique agricultural market dynamics.