The effects of weather extremes on wheat prices in Russia: The role of inputs and Russia’s war in Ukraine

Utilizing the normalized difference vegetation index (NDVI) in the error correction model, we examine the effects of weather anomalies on wheat prices in six wheat-producing regions in Russia. Our analysis reveals that weather-induced price effects are most pronounced in regions most distant from the world market, particularly those primarily producing spring wheat for domestic consumption. These findings are corroborated by a model that incorporates precipitation data and partially supported by a model that uses maximum temperature as an alternative measure for weather extremes. The absence of significant weather impacts on wheat prices in the exporting North Caucasus region likely reflects the region's advanced production systems and modern management practices. Since Russia's invasion of Ukraine, the profitability of wheat production for Russian farmers has declined substantially, leading to reduced use of agricultural inputs. If this trend of low input application continues, weather fluctuations could have a more pronounced impact on wheat prices.