The effects of trade policy on domestic dairy market: the case of Russian food import ban on regional cheese market integration in Russia

We study the effects of Russia s food import ban implemented in August of 2014 on the Russian dairy market based on the price transmission and price dispersion approach. Cheese is the only dairy product for which domestic production has significantly increased since the implementation of the import ban whereas cheese imports have strongly decreased. Results show that for most of the regional price pairs under study, cointegration of cheese prices between producing and consuming regions has substantially increased with the import ban. In 29 out of the 39 price pairs cointegration emerged after the implementation of the import ban. Furthermore, in 5 price pairs the degree of long term price transmission and speed of adjustment improved significantly during the import ban regime. Moreover, the dispersion of cheese prices between consuming metropoles and cheese producing regions has significantly increased. The export ban, reduction in import level of cheese and milk, and increase in agricultural price index has affected the dispersion significantly. We conclude that in spite of the observed reinforced integration of regional markets, the market efficiency in general has not increased necessarily by the boosted domestic cheese trade. Acknowledgement : This study was conducted within the STARLAP project, financially supported by the German Ministry of Food and Agriculture (BMEL) through the Federal Office for Agriculture and Food (BLE)