IDEAS home Printed from https://ideas.repec.org/a/eee/renene/v185y2022icp665-679.html
   My bibliography  Save this article

Biofuel feedstock contract attributes, substitutability and tradeoffs in sugarcane production for ethanol in the Brazilian Cerrado: A stated choice approach

Author

Listed:
  • Sant’Anna, Ana Claudia
  • Bergtold, Jason S.
  • Shanoyan, Aleksan
  • Caldas, Marcellus M.
  • Granco, Gabriel

Abstract

Biofuel expansion may entail elaborate contractual relationships between processors and farmers. Past studies have been limited to explaining choices between single contracts or standard land fixed rental versus crop share contracts. Little is known about how changes in contract attributes affect the probability of farmers' switching between contracts, if given the choice. Contract choice in turn, has implications for biofuel market structure and farmer welfare. Sugarcane expansion into the Brazilian Cerrado provides an optimal setting to investigate farmers’ willingness to enter into contractual arrangements with biofuel processors. The study design involves a hypothetical stated choice experiment conducted with farmers and landowners in the Cerrado. Respondents choose between three contract types (land rental, agricultural partnership, and supply) or to opt-out. A novel two-opt opt model was applied to better model the opt out decision. Data is analyzed using a random parameter mixed logit model. Willingness to pay for contract attributes highlight farmer preference for shorter contracts with higher revenues. Direct and cross-attribute elasticities results provide unique insight into how market competition and farmer welfare can be affected by the substitution between contract options. They show a larger probability of substitution from more autonomous (e.g. supply) to less autonomous (e.g. land rental) contracts. Farmer contract preferences can motivate vertical integration in the emerging biofuel market, potentially resulting in consequences for farmer welfare and long-run sustainability of biofuel production. Our findings provide guidance for countries seeking to expand biofuel production in areas with enrooted agricultural production systems.

Suggested Citation

  • Sant’Anna, Ana Claudia & Bergtold, Jason S. & Shanoyan, Aleksan & Caldas, Marcellus M. & Granco, Gabriel, 2022. "Biofuel feedstock contract attributes, substitutability and tradeoffs in sugarcane production for ethanol in the Brazilian Cerrado: A stated choice approach," Renewable Energy, Elsevier, vol. 185(C), pages 665-679.
    • Handle: RePEc:eee:renene:v:185:y:2022:i:c:p:665-679
    DOI: 10.1016/j.renene.2021.12.021
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0960148121017419
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.renene.2021.12.021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Xi Yang & Nicholas D. Paulson & Madhu Khanna, 2016. "Optimal Mix of Vertical Integration and Contracting for Energy Crops: Effect of Risk Preferences and Land Quality," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(4), pages 632-654.
    2. Adamowicz, Wiktor & Swait, Joffre & Boxall, Peter & Louviere, Jordan & Williams, Michael, 1997. "Perceptions versus Objective Measures of Environmental Quality in Combined Revealed and Stated Preference Models of Environmental Valuation," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 65-84, January.
    3. Mohit Anand & Ruiqing Miao & Madhu Khanna, 2019. "Adopting bioenergy crops: Does farmers’ attitude toward loss matter?," Agricultural Economics, International Association of Agricultural Economists, vol. 50(4), pages 435-450, July.
    4. Zhou, Adrian & Thomson, Elspeth, 2009. "The development of biofuels in Asia," Applied Energy, Elsevier, vol. 86(Supplemen), pages 11-20, November.
    5. Bhat, Chandra R., 1998. "Accommodating flexible substitution patterns in multi-dimensional choice modeling: formulation and application to travel mode and departure time choice," Transportation Research Part B: Methodological, Elsevier, vol. 32(7), pages 455-466, September.
    6. Daglia Calil, Yuri Clements & Ribera, Luis, 2019. "Brazil’s Agricultural Production and Its Potential as Global Food Supplier," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 34(3), September.
    7. Klepacka, Anna M. & Florkowski, Wojciech J. & Revoredo-Giha, Cesar, 2019. "The expansion and changing cropping pattern of rapeseed production and biodiesel manufacturing in Poland," Renewable Energy, Elsevier, vol. 133(C), pages 156-165.
    8. Madhu Khanna & Jordan Louviere & Xi Yang, 2017. "Motivations to grow energy crops: the role of crop and contract attributes," Agricultural Economics, International Association of Agricultural Economists, vol. 48(3), pages 263-277, May.
    9. Qiang Liu & Thomas J. Steenburgh & Sachin Gupta, 2015. "The Cross Attributes Flexible Substitution Logit: Uncovering Category Expansion and Share Impacts of Marketing Instruments," Marketing Science, INFORMS, vol. 34(1), pages 144-159, January.
    10. Higgins, Andrew J. & Muchow, Russell C., 2003. "Assessing the potential benefits of alternative cane supply arrangements in the Australian sugar industry," Agricultural Systems, Elsevier, vol. 76(2), pages 623-638, May.
    11. Bergtold, Jason S. & Shanoyan, Aleksan & Fewell, Jason E. & Williams, Jeffery R., 2017. "Annual bioenergy crops for biofuels production: Farmers' contractual preferences for producing sweet sorghum," Energy, Elsevier, vol. 119(C), pages 724-731.
    12. Keith J. Crocker & Scott E. Masten, 1988. "Mitigating Contractual Hazards: Unilateral Options and Contract Length," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 327-343, Autumn.
    13. Signorini, Guilherme & Ortega, David L. & Ross, R. Brent & Peterson, H. Christopher, 2021. "Heterogeneity in farmers’ willingness to produce bioenergy crops in the Midwest USA," Agricultural and Resource Economics Review, Cambridge University Press, vol. 50(2), pages 367-393, August.
    14. Souza, Simone Pereira & Nogueira, Luiz Augusto Horta & Martinez, Johan & Cortez, Luis Augusto Barbosa, 2018. "Sugarcane can afford a cleaner energy profile in Latin America & Caribbean," Renewable Energy, Elsevier, vol. 121(C), pages 164-172.
    15. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    16. Embaye, Weldensie T. & Bergtold, Jason S. & Archer, David & Flora, Cornelia & Andrango, Graciela C. & Odening, Marting & Buysse, Jeroen, 2018. "Examining farmers' willingness to grow and allocate land for oilseed crops for biofuel production," Energy Economics, Elsevier, vol. 71(C), pages 311-320.
    17. Mintewab Bezabih, 2009. "Heterogeneous Risk Preferences, Discount Rates and Land Contract Choice in Ethiopia," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 402-418, June.
    18. Kwabena Krah & Daniel R Petrolia & Angelica Williams & Keith H Coble & Ardian Harri & Roderick M Rejesus, 2018. "Producer Preferences for Contracts on a Risky Bioenergy Crop," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 40(2), pages 240-258.
    19. Ghoddusi, Hamed, 2017. "Price risks for biofuel producers in a deregulated market," Renewable Energy, Elsevier, vol. 114(PB), pages 394-407.
    20. Barrowclough, Michael & Boys, Kathryn A. & Carpio, Carlos, 2019. "Benefits, Challenges and Trade-Offs: Buyer and Contract Characteristics Valued by Small Farm Suppliers to Wholesale Marketing Channels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 44(3), September.
    21. Hensher, David A. & Collins, Andrew T. & Rose, John M. & Smith, Nariida C., 2013. "Direct and cross elasticities for freight distribution access charges: Empirical evidence by vehicle class, vehicle kilometres and tonne vehicle kilometres," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 56(C), pages 1-21.
    22. Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, September.
    23. George Hendrikse & Jos Bijman, 2002. "Ownership Structure in Agrifood Chains: The Marketing Cooperative," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 104-119.
    24. Jayson L. Lusk & Darren Hudson, 2004. "Willingness-to-Pay Estimates and Their Relevance to Agribusiness Decision Making," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(2), pages 152-169.
    25. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.
    26. Sant'Anna, Ana Claudia & Shanoyan, Aleksan & Bergtold, Jason Scott & Caldas, Marcellus M. & Granco, Gabriel, 2016. "Ethanol and sugarcane expansion in Brazil: what is fueling the ethanol industry?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(4), September.
    27. Hensher,David A. & Rose,John M. & Greene,William H., 2015. "Applied Choice Analysis," Cambridge Books, Cambridge University Press, number 9781107465923, September.
    28. Brinkman, Marnix L.J. & da Cunha, Marcelo P. & Heijnen, Sanne & Wicke, Birka & Guilhoto, Joaquim J.M. & Walter, Arnaldo & Faaij, André P.C. & van der Hilst, Floor, 2018. "Interregional assessment of socio-economic effects of sugarcane ethanol production in Brazil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 88(C), pages 347-362.
    29. Ani L. Katchova & Ana Claudia Sant’Anna, 2019. "Impact of Ethanol Plant Location on Corn Revenues for U.S. Farmers," Sustainability, MDPI, vol. 11(22), pages 1-13, November.
    30. Desta B. Gebrehiwot & Stein T. Holden, 2020. "Variation in Output Shares and Endogenous Matching in Land Rental Contracts: Evidence from Ethiopia," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(1), pages 260-282, February.
    31. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-185, March.
    32. Ana Claudia Sant'Anna & Jason S. Bergtold & Aleksan Shanoyan & Gabriel Granco & Marcellus M. Caldas, 2018. "Examining the relationship between vertical coordination strategies and technical efficiency: Evidence from the Brazilian ethanol industry," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 793-812, October.
    33. Alexander, Corinne & Ivanic, Rasto & Rosch, Stephanie & Tyner, Wallace & Wu, Steven Y. & Yoder, Joshua R., 2012. "Contract theory and implications for perennial energy crop contracting," Energy Economics, Elsevier, vol. 34(4), pages 970-979.
    34. Kassu Wamisho Hossiso & Aaron Laporte & David Ripplinger, 2017. "The Effects of Contract Mechanism Design and Risk Preferences on Biomass Supply for Ethanol Production," Agribusiness, John Wiley & Sons, Ltd., vol. 33(3), pages 339-357, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. le Maitre, Julia & Ryan, Geraldine & Power, Bernadette & Sirr, Gordon, 2024. "Mechanisms to promote household investment in wind energy: A national experimental survey," Renewable Energy, Elsevier, vol. 220(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sant'Anna, Ana Claudia & Bergtold, Jason & Shanoyan, Aleksan & Caldas, Marcellus & Granco, Gabriel, 2021. "Deal or No Deal? Analysis of Bioenergy Feedstock Contract Choice with Multiple Opt-out Options and Contract Attribute Substitutability," 2021 Conference, August 17-31, 2021, Virtual 315289, International Association of Agricultural Economists.
    2. Haghani, Milad & Bliemer, Michiel C.J. & Hensher, David A., 2021. "The landscape of econometric discrete choice modelling research," Journal of choice modelling, Elsevier, vol. 40(C).
    3. Hudson Darren & Lusk Jayson, 2004. "Risk and Transactions Cost in Contracting: Results from a Choice-Based Experiment," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-19, February.
    4. Bjørnåvold, Amalie & David, Maia & Bohan, David A. & Gibert, Caroline & Rousselle, Jean-Marc & Van Passel, Steven, 2022. "Why does France not meet its pesticide reduction targets? Farmers' socio-economic trade-offs when adopting agro-ecological practices," Ecological Economics, Elsevier, vol. 198(C).
    5. Bergtold, Jason S. & Shanoyan, Aleksan & Fewell, Jason E. & Williams, Jeffery R., 2017. "Annual bioenergy crops for biofuels production: Farmers' contractual preferences for producing sweet sorghum," Energy, Elsevier, vol. 119(C), pages 724-731.
    6. Krah, Kwabena & Michelson, Hope & Perge, Emilie & Jindal, Rohit, 2019. "Constraints to adopting soil fertility management practices in Malawi: A choice experiment approach," World Development, Elsevier, vol. 124(C), pages 1-1.
    7. Carlsson, Fredrik & Frykblom, Peter & Lagerkvist, Carl Johan, 2004. "Consumer willingness to pay for farm animal welfare - transportation of farm animals to slaughter versus the use of mobile abattoirs," Working Papers in Economics 149, University of Gothenburg, Department of Economics.
    8. Clark Lundberg & Tristan Skolrud & Bahram Adrangi & Arjun Chatrath, 2021. "Oil Price Pass through to Agricultural Commodities†," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 721-742, March.
    9. Bae, Jeong Hwan & Rishi, Meenakshi & Li, Dmitriy, 2021. "Consumer preferences for a green certificate program in South Korea," Energy, Elsevier, vol. 230(C).
    10. Caroline Roussy & Aude Ridier & Karim Chaïb, 2014. "Adoption d’innovations par les agriculteurs : rôle des perceptions et des préférences," Post-Print hal-01123427, HAL.
    11. W. Bowman Cutter & Linwood Pendleton & J. R. DeShazo, 2007. "Activities in Models of Recreational Demand," Land Economics, University of Wisconsin Press, vol. 83(3), pages 370-381.
    12. Deepayan Debnath & Madhu Khanna & Deepak Rajagopal & David Zilberman, 2019. "The Future of Biofuels in an Electrifying Global Transportation Sector: Imperative, Prospects and Challenges," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(4), pages 563-582, December.
    13. Ana I. Sanjuán‐López & Helena Resano‐Ezcaray, 2020. "Labels for a Local Food Speciality Product: The Case of Saffron," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(3), pages 778-797, September.
    14. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.
    15. Reema Bera & Bhargab Maitra, 2021. "Analyzing Prospective Owners’ Choice Decision towards Plug-in Hybrid Electric Vehicles in Urban India: A Stated Preference Discrete Choice Experiment," Sustainability, MDPI, vol. 13(14), pages 1-24, July.
    16. Nguyen, Ly & Gao, Zhifeng & Anderson, James L., 2022. "Regulating menu information: What do consumers care and not care about at casual and fine dining restaurants for seafood consumption?," Food Policy, Elsevier, vol. 110(C).
    17. Sriwastava, Ambuj & Reichert, Peter, 2023. "Reducing sample size requirements by extending discrete choice experiments to indifference elicitation," Journal of choice modelling, Elsevier, vol. 48(C).
    18. Raux, Charles & Chevalier, Amandine & Bougna, Emmanuel & Hilton, Denis, 2021. "Mobility choices and climate change: Assessing the effects of social norms, emissions information and economic incentives," Research in Transportation Economics, Elsevier, vol. 90(C).
    19. Van Loo, Ellen J. & Caputo, Vincenzina & Lusk, Jayson L., 2020. "Consumer preferences for farm-raised meat, lab-grown meat, and plant-based meat alternatives: Does information or brand matter?," Food Policy, Elsevier, vol. 95(C).
    20. Nguyen, Ly & Gao, Zhifeng & Anderson, James L. & House, Lisa A., 2022. "The Impacts of Covid-19 on Consumers’ Willingness to Pay for Information Transparency at Casual and Fine Dining Restaurants," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322463, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Biofuel; Brazil; Contract; Farmer; Sugar cane; Stated choice experiment; Substitution;
    All these keywords.

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:renene:v:185:y:2022:i:c:p:665-679. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/renewable-energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.