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Are Local Corn Prices Affected by the Location of Ethanol Biorefineries?

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  • Katchova, Ani L.

Abstract

This study examines whether the local competition for corn to produce ethanol has lead to significantly higher prices for farmers located close to ethanol biorefineries. If any, such price premiums for spatial closeness would be in addition to the general level of corn price changes experienced by farmers throughout the U.S. The difference-in-differences estimation method is used to account for both time and spatial differences in order to measure the interaction of time and spatial effects. Using the USDA’s ARMS data, the results show that while prices in real terms have changed over time, farmers located close to ethanol biorefineries have not received significantly higher prices than farmers living farther away from biorefineries. These findings indicate that there is a lack of evidence for price premiums due to spatial closeness to ethanol plants.

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File URL: http://purl.umn.edu/114769
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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland with number 114769.

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Date of creation: 02 Sep 2011
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Handle: RePEc:ags:eaae11:114769

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Keywords: corn prices; ethanol; ethanol plant location; difference-in-differences.; Agribusiness; Demand and Price Analysis; Resource /Energy Economics and Policy;

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  1. Xiaodong Du & David A. Hennessy & William M. Edwards, 2008. "Does a Rising Biofuels Tide Raise All Boats? A Study of Cash Rent Determinants for Iowa Farmland under Hay and Pasture," Center for Agricultural and Rural Development (CARD) Publications 08-wp479, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Sarmiento, Camilo & Wilson, William W., 2007. "Spatial Competition And Ethanol Plant Location Decisions," Agribusiness & Applied Economics Report 9236, North Dakota State University, Department of Agribusiness and Applied Economics.
  3. Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 88-102.
  4. Kleiber, Kandice, 2009. "The Effect of Ethanol-Driven Corn Demand on Crop Choice," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49616, Agricultural and Applied Economics Association.
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