Quantifying the impact of Russia–Ukraine crisis on food security and trade pattern: evidence from a structural general equilibrium trade model, 2023, China Agricultural Economic Review, 15(2), pp.241-258. (with Fan Feng and Faqin Lin).
Considering the importance of Russia and Ukraine in agriculture, the authors quantify the potential impact of the Russia–Ukraine conflict on food output, trade, prices and food security for the world. The authors mainly use the quantitative and structural multi-country and multi-sector general equilibrium trade model to analyze the potential impacts of the conflict on the global food trade pattern and security. First, the authors found that the conflict would lead to soaring agricultural prices, decreasing trade volume and severe food insecurity especially for countries that rely heavily on grain imports from Ukraine and Russia, such as Egypt and Turkey. Second, major production countries such as the United States and Canada may even benefit from the conflict. Third, restrictions on upstream energy and fertilizer will amplify the negative effects of food insecurity. This study analyzed the effect of Russia–Ukraine conflict on global food security based on sector linkages and the quantitative general equilibrium trade framework. With a clearer demonstration of the influence about the inherent mechanism based on fewer parameters compared with traditional Global Trade Analysis Project (GTAP) models, the authors showed integrated impacts of the conflict on food output, trade, prices and welfare across sectors and countries.
The impact of Russia-Ukraine conflict on global food security, 2023, Global Food Security, 36. (with Faqin Lin, Xuecao Li, Fan Feng, Hai Huang, Jianxi Huang, Shenggen Fan, Philippe Ciais, Xiao-Peng Song).
Ukraine and Russia are two important grain producers and exporters in the world, accounting for 12% and 17% of the world's wheat exports, respectively. The conflict between Russia and Ukraine may greatly impact Ukraine's wheat production and export as well as Russia's wheat export. Satellite observations have showed signs of wheat production reduction in Ukraine in the season 2021–2022. Considering the uncertainty of the conflict duration, we have designed three scenarios (i.e., slight, medium, and severe) depending on how the war would significantly impact the wheat harvest and trade disruption. From analysis of potential impacts of the conflict on global wheat market under the general equilibrium trade model, we have found that the conflict would lead to a trade drop (60%), soaring wheat prices (50%), and severe food insecurity with decreased purchasing power for wheat (above 30%) in the most severe scenario, especially for countries that heavily rely on wheat imports from Ukraine, such as Egypt, Turkey, Mongolia, Georgia, and Azerbaijan. Considering the role of Russia and Ukraine in agricultural input sectors including oil, natural gas, and fertilizers, especially Russia, the trade blockade caused by the conflict will give rise to price increase by 10%–30% and welfare decline by 15–25% for most affected countries. The conflict would put as many as 1.7 billion people in hunger and 276 million people in severe food insecurity. Food shortages, energy shortages and inflation have spread to many countries like dominoes which have fallen into trouble one after another with social unrest day after day. Our analysis also shows that countries including the United States, China, India, Canada, Australia, France, Argentina, and Germany would increase their wheat production and exports for the reconstruction of the global wheat supply pattern. The modeled results indicate that the conflict-induced global wheat crisis and food insecurity can be notably alleviated if these countries increase their production by 2%–3% in 2022–2023 and unnecessary trade restrictions are exempted.
Works in progress
Relationships in Commodity Trade: LNG Contracts (with Swati Dhingra, Gianmarco Ottaviano, Thomas Sampson, and Catherine Thomas).
Long-term contracts between buyers and sellers of commodities are common even in industries where goods are also traded on global spot markets. This paper investigates the relative efficiency of the long-term contracts in liquefied natural gas (LNG) that accounted for 75% of total industry volumes from 2009 to 2019. Shipment-level data are used to estimate a structural model of LNG supply and demand where sellers exert relationship-specific effort in relationships governed by incomplete contracts. The model is identified by exogenous demand shifts from weather shocks and variation in shipment delivery times. The results suggest sellers' efforts help ensure contract shipments fit buyers' desired quantities and timings better than their alternative spot market options. Local spot markets are thin due to their small size and supply-side frictions due to bulky vessels and the long distances between buyers and sellers. A counterfactual that supplies all shipments to spot markets, holding quantities and final destinations constant, shows that contracts increased the value of the global industry by over 50% over the period studied because the returns to seller effort within contractual relationships outweighed the negative spillovers on spot market size.