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A Case Study on the Impact of an Ethanol Plant on Corn Price

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  • Fort, Christian
  • Parcell, Joe

Abstract

An increase in corn prices of the local area tend to occur when an ethanol plant begins operation. The objective of this research is to evaluate the impact of a corn processing ethanol plant on corn price levels. Results indicate that farmers in the nine-county area surrounding Macon, Missouri have seen increased farm revenues to $4.12 million annually, or a weighted average corn price increase of $0.12/bushel. This is an increase of about $0.10/bushel for all corn sold in the surrounding region, and a $0.19/bushel increase for corn sold directly to the ethanol plant. For the case of a $0.12/bushel weighted average corn price increase, a land value increase of $161/acre to reflect the increase in returns per acre was estimated. Thus, landowners are the actual benefactors of an increase in corn price from ethanol production.

Suggested Citation

  • Fort, Christian & Parcell, Joe, 2006. "A Case Study on the Impact of an Ethanol Plant on Corn Price," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2006, pages 1-5.
    • Handle: RePEc:ags:jasfmr:190688
    DOI: 10.22004/ag.econ.190688
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    File URL: https://ageconsearch.umn.edu/record/190688/files/250_Parcell.pdf
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    References listed on IDEAS

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    1. Kevin McNew & Duane Griffith, 2005. "Measuring the Impact of Ethanol Plants on Local Grain Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 164-180.
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    Cited by:

    1. Parcell, Joseph L. & Westhoff, Patrick C., 2006. "Economic Effects of Biofuel Production on States and Rural Communities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(2), pages 1-11, August.
    2. Williams, John & McSweeney, Peter & Salmon, Robert, 2014. "Australian Farm Investment: Domestic and Overseas Issues," Papers 234408, University of Melbourne, Melbourne School of Land and Environment.
    3. Jasper Grashuis, 2019. "Spatial Competition in the Iowa Corn Market: Informing the Pricing Behavior of Corporate and Cooperative Grain Merchants," Sustainability, MDPI, vol. 11(4), pages 1-13, February.
    4. Grashuis Jasper, 2020. "The Competitive Impact of Cooperatives on the Spot Market: A Spatial Analysis of Iowa Corn Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 18(2), pages 1-11, November.
    5. Altman, Ira J. & Sanders, Dwight R. & Johnson, Thomas G., 2011. "The Local Economic Impacts of Ethanol Plant Expansion: A Missouri Case Study," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2011, pages 1-5, June.
    6. Jung, Jinho & Sesmero, Juan Pablo & Balagtas, Joseph V., 2017. "Market Power in Feedstock Procurement and Economic Effects of Corn Ethanol," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258544, Agricultural and Applied Economics Association.

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