COVID-19, spatial market integration and producer prices: A case study of EU agri-food markets

The spread of COVID-19 has had a significant impact on economic and social activities, with the agri-food sector being no exception. Since the COVID-19 outbreak, numerous studies investigating its sectoral influence have been carried out, putting emphasis on demand and supply shocks and changes in trade volumes. However, there has not been much research into the implications of the pandemic for prices. To fill the research gap, this paper is an attempt to examine the impact of COVID-19 on producer prices in the EU-27 in Q2 and Q3 of 2020. The study is based on monthly data on trade in agri-food commodities according to the SITC classification in 2015-2020 and the monthly producer prices index of food (2015 = 100) in the EU countries. It was assumed that the agri-food trade balance is the key factor determining the level and changes of domestic prices. The theoretical background for empirical research is provided by a spatial partial equilibrium model and the concept of spatial market integration. The results of the study reveal that there is a negative and statistically significant relationship between an export-import ratio (which illustrates the country's self-sufficiency level) in the pre-COVID-19 period and price changes in Q2 of 2020 as well as Q3 of 2020. However, no statistically significant results were obtained for the regression models explaining the relationship between changes in the export/import ratio and price changes in second and third quarters of 2020.