INTEGRATION OF UKRAINIAN GRAIN MARKETS WITH FOREIGN MARKETS DURING RUSSIA'S INVASION OF UKRAINE

The paper aims to evaluate the implications of the Russian-Ukrainian conflict for the strength and nature of the integration of Ukrainian grain markets with world markets. The empirical research is based on the theoretical foundations of spatial market integration and the spatial market equilibrium model. According to them, changes in the integration of Ukrainian and world wheat, corn, and barley markets are evaluated via fluctuations in trade flow volumes, changes in trade costs and price co-movement. To analyze trade implications, monthly trade flow volumes, trade shares, and trade concentration measures during the conflict were compared with expected values assuming no war. To evaluate the implications of the conflict for trade costs, the authors analyzed differences between Ukrainian and world grain prices. Relying on the weekly price series, the price co-movement was assessed using the autoregressive distributed lag model (ARDL) and Granger instantaneous causality test. The results show that the strength of the integration of Ukrainian grain markets with world markets has deteriorated due to the conflict. It is confirmed by the decrease in the grain export volumes from Ukraine, the increase in price differences, and the lack of significant price transmission between Ukrainian and global grain markets since the war outbreak in February 2022. Moreover, the nature of the market integration has changed. One can observe a growing role of the European Union countries in the Ukrainian grain export share and changes in the Ukrainian grain export concentration. Such behaviour is in line with the theoretical foundation of the spatial market equilibrium model and theory of international integration.