Pricing to Market: The case of EU wheat exports

The European Union (EU) is an important player in the global wheat market. This paper examines the pricing behavior of EU wheat exporters. “Pricing to market” is the relationship between export unit values and the exchange rates which is estimated using quarterly data for 11 export destinations for the years 2000 to 2013. Panel cointegration methods show three results. First, there is a meaningful long-run relationship between export unit values and exchange rates. Second, there is little evidence of differential mark-ups between export markets. Belarus and Iceland are exceptions where the EU exercises local currency price stabilization, and in the long run a 1% increase in the exchange rate leads to a 0.83% decrease in export unit value. Third, the estimated speed of adjustment for Belarus and Iceland implies that a third of the adjustment to long-run equilibrium takes place in the first year following a shock with full adjustment taking 10 years. International comparison of product supply chains in the agri-food sector: determinants of their competitiveness and performance on EU and international markets