By Daniele Curzi[1], Dela-Dem Doe Fiankor[2], Roberto Solazzo[3], and Daniele Valenti[4]
Global agricultural markets have experienced recurrent spikes in wheat prices over the past two decades, driven by extreme weather events, rising input costs, tightening stocks, and, more recently, the COVID-19 pandemic and the Russia–Ukraine conflict. These developments have renewed interest in how firms that rely on wheat as a key intermediate input adjust their pricing strategies in response to large and persistent commodity price fluctuations. This paper examines how Italian firms exporting pasta and wheat-based derivatives adjust export prices when confronted with shocks to the global wheat market.
We combine a time-series analysis of global wheat price dynamics with firm-level trade data. Using the universe of Italian firm-product-destination export records over 2004–2022, we study how export prices respond to structural shocks identified in the international wheat market. To do so, we first estimate a Bayesian Structural Vector Autoregressive (BSVAR) model for the global wheat market, following Valenti et al. (2025), using quarterly data from 1970–2022. The model identifies five fundamental drivers of wheat price movements: supply shocks, global economic activity shocks, energy demand shocks, precautionary (inventory) demand shocks, and wheat-specific demand shocks. These structural shocks are then aggregated to the annual frequency and linked to firms’ export pricing decisions.
In the second step, we estimate a panel model of firm-level export prices, proxied by Free on Board (FOB) unit values, for pasta and wheat-derivative exporters. The inclusion of firm–product–destination fixed effects allows us to isolate how unexpected changes in global wheat market fundamentals translate into within-relationship price adjustments. We additionally control for bilateral tariffs, destination income and market size, and remoteness, capturing standard determinants of export prices highlighted in the trade literature.
The baseline results show that global wheat shocks are systematically transmitted to export prices, but with notable differences across shock types. Positive wheat supply shocks reduce export price growth, consistent with lower input costs being passed through downstream. By contrast, demand-side shocks – particularly those linked to global economic activity and wheat-specific demand – lead to sizable increases in export prices. Energy demand shocks also raise export prices, reflecting cost-push effects operating through energy-intensive inputs such as fertilizer and transport. Precautionary demand shocks, associated with heightened uncertainty and inventory accumulation, are instead linked to lower export price growth, suggesting margin compression or delayed pass-through during periods of elevated risk.
Further analysis reveals important asymmetries in price adjustment. Firms raise export prices sharply in response to positive shocks that increase wheat prices, but reduce them only modestly when shocks operate in the opposite direction. This asymmetry is especially pronounced for global economic activity shocks, indicating that exporters respond more strongly to favourable demand conditions than to downturns.
We also document substantial heterogeneity in pass-through. Pasta exporters exhibit stronger price responses than firms producing other wheat derivatives, consistent with tighter technological and input linkages to durum wheat. Firms exporting to more distant destinations adjust prices less, suggesting partial absorption of shocks through markups. Larger and more diversified firms similarly display attenuated responses, indicating a greater capacity to smooth margins and buffer input price volatility.
Overall, the results highlight how upstream commodity price shocks propagate unevenly through food value chains. The origin of wheat price fluctuations and the characteristics of exporting firms both matter for the magnitude and direction of downstream price adjustments. These findings underscore the importance of accounting for shock heterogeneity and firm-level resilience when assessing food price transmission and the stability of agri-food export sectors in an environment of heightened global volatility.
References
Valenti, D., Bertoni, D., Cavicchioli, D., and Olper, A. (2025). Understanding the role of supply and demand factors in the global wheat market. European Review of Agricultural Economics. https://doi.org/10.1093/erae/jbaf056
[1] Department of Environmental Science and Policy, University of Milan, Italy.
[2] Department of Agricultural Economics and Rural Development, University of Göttingen, Germany.
[3] Consiglio per la ricerca in agricoltura e l’analisi dell’economia in agraria (CREA), Italy.
[4] Fondazione Eni Enrico Mattei (FEEM), Milan, Italy.
