Price risk management in the agro-industrial complex

Abstract

Purpose. The purpose of the study is to provide a scientific rationale for the transition from situational responses to a system-based approach to price risk management in the agro-industrial complex (AIC) of Kharkiv region under martial law. In particular, the study focuses on analyzing and assessing the application of hedging mechanisms (futures and options) to minimize price risks for grain and industrial crops in order to enhance the economic resilience of the region’s agricultural sector. Methods. The study employs the dialectical method to reveal the essence of price risks in the agro-industrial complex and to identify their interrelation with the conditions of martial law. A systems approach is used to analyze the agricultural sector of Kharkiv region as an integrated socio-economic system whose functioning depends on production, logistics, and external market factors. Economic and statistical methods are applied to assess the dynamics of production, exports, and price volatility of major grain and industrial crops. Comparative analysis is used to compare yield indicators and performance of agricultural production in Kharkiv region with other regions of Ukraine. Economic modeling is employed to substantiate the effectiveness of futures and options contracts as instruments for hedging price risks. Results. The findings confirm the critical vulnerability of Kharkiv region’s agricultural sector to price shocks under wartime conditions. Approximately 90% of the region’s gross agricultural output is generated by crop production, while agri-food products account for 44.5% of its exports (USD 248.5 million over the first nine months of 2025). Accordingly, even global price fluctuations of 5–10% may lead to substantial losses for the regional economy. The war has significantly constrained the production capacity of the agricultural sector due to farm losses, damage to machinery, and land contamination by mines; however, in 2024 the sector partially recovered, with gross grain output increasing by 22.5% compared to 2023 and substantially exceeding domestic demand (approximately 0.7 million tons per year). This generates a considerable export surplus and increases producers’ dependence on external markets. Monitoring of domestic prices revealed high volatility in 2023–2024: wheat prices ranged from approximately UAH 5,500 to UAH 9,200 per ton, while corn prices fluctuated between approximately UAH 4,000 and UAH 8,000 per ton. Such amplitudes confirm the high risk of relying solely on the spot market and highlight the relevance of price insurance. The use of hedging instruments on international exchanges (such as Euronext) makes it possible to lock in future prices and protect producers’ revenues. The current structure of the wheat futures market (contango) creates opportunities to contract the 2026 harvest at prices higher than current levels. Modeling of alternative risk management strategies confirmed the effectiveness of hedging. Without price protection, a decline in wheat quotations from EUR 175 to EUR 160 per ton would result in a loss of approximately EUR 15,000 per 1,000 tons (with revenue decreasing to about EUR 160,000). Selling futures at EUR 190.25 per ton fully neutralizes this risk: even at a spot price of EUR 160 per ton, losses on the physical market are offset by gains from the exchange position, ensuring an effective price of approximately EUR 190 per ton. Purchasing a put option with a strike price of EUR 188 per ton (premium of approximately EUR 3.9 per ton) guarantees a minimum price of about EUR 184 per ton while preserving the opportunity to benefit from price increases above the strike level (net of the premium). Thus, the implementation of a system-based approach to price risk management through hedging mechanisms is a necessary condition for ensuring the financial stability of Kharkiv region’s agricultural sector under martial law. According to the estimates, hedging at least 30% of the region’s grain export volume would prevent losses of approximately EUR 12 million in revenues under unfavorable market conditions, thereby stabilizing cash flows of agricultural producers, ensuring regular budget revenues, and enhancing the creditworthiness of the sector.