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The Spatial Effect of Ethanol Biorefinery Locations on Local Corn Prices

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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 plants. 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 location differences in order to measure the interaction of time and location effects. Using the USDA’s ARMS data, the results show that while prices in real terms have risen over time, farmers located close to ethanol plants have not received significantly higher prices than farmers living farther away from plants. These findings indicate that there is a lack of evidence for price premiums due to the spatial closeness to ethanol plants.

Suggested Citation

  • Katchova, Ani L., 2009. "The Spatial Effect of Ethanol Biorefinery Locations on Local Corn Prices," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49309, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea09:49309
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    File URL: http://purl.umn.edu/49309
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    References listed on IDEAS

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    1. 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.
    2. Park, Hwanil & Fortenbery, T. Randall, 2007. "The Effect of Ethanol Production on the U.S. National Corn Price," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37565, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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    Cited by:

    1. Liu, Bing & Hudson, Darren & Farmer, Michael, 2015. "The Impact of a Sorghum-Based Ethanol Plant on Local Cotton Acreage: A Spatial Approach," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229799, Southern Agricultural Economics Association.
    2. Arora, Gaurav & Wolter, Peter T. & Feng, Hongli & Hennessy, David A., 2015. "Role of Ethanol Plants in Dakotas’ Land Use Change: Analysis Using Remotely Sensed Data," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205877, Agricultural and Applied Economics Association;Western Agricultural Economics Association.

    More about this item

    Keywords

    corn prices; ethanol; ethanol plant location; difference-in-differences.; Agribusiness; Marketing; Q13;

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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