IDEAS home Printed from https://ideas.repec.org/p/ags/aaea12/124915.html
   My bibliography  Save this paper

Technology, Markets, and Ethanol Plants Shutdown Price

Author

Listed:
  • Sesmero, Juan P.
  • Perrin, Richard K.
  • Fulginiti, Lilyan E.

Abstract

Price volatility and policy changes may compromise the ability of corn ethanol plants to operate above average variable cost and avoid shutdown. This study derives a variable cost function capable of accommodating two features of ethanol plants; 1) some inputs are used in fixed proportions and some are not, and 2) supply of different types of byproducts may be subject to unobservable market frictions. The function is estimated based on data from a survey of ethanol plants. Increased size does not seem to lower plants’ shutdown price. Frictions in byproduct markets seem to result in sub-optimal byproduct mix choices that increase ethanol shutdown price by up to 10 cents per gallon. Futures and other price discovery instruments in byproduct markets may enhance plants’ ability to prevent shutdown.

Suggested Citation

  • Sesmero, Juan P. & Perrin, Richard K. & Fulginiti, Lilyan E., 2012. "Technology, Markets, and Ethanol Plants Shutdown Price," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124915, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:124915
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/124915
    Download Restriction: no

    References listed on IDEAS

    as
    1. Gardner Bruce, 2007. "Fuel Ethanol Subsidies and Farm Price Support," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-22, December.
    2. Utpal Vasavada & Robert G. Chambers, 1986. "Investment in U.S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 950-960.
    3. Perrin, Richard K. & Fretes, Nickolas F. & Sesmero, Juan Pablo, 2009. "Efficiency in Midwest US corn ethanol plants: A plant survey," Energy Policy, Elsevier, vol. 37(4), pages 1309-1316, April.
    4. Chambers, Robert G. & Pope, Rulon D., 1993. "A Virtually Ideal Production System: Specifying and Estimating the VIPS Model," Working Papers 197785, University of Maryland, Department of Agricultural and Resource Economics.
    5. Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant size: Capital cost relationships in the dry mill ethanol industry," ISU General Staff Papers 200506010700001442, Iowa State University, Department of Economics.
    6. Lambert, Dayton M. & Wilcox, Michael D. & English, Alicia & Stewart, Lance A., 2008. "Ethanol Plant Location Determinants and County Comparative Advantage," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(01), April.
    7. Stefanou, Spiro E, et al, 1992. "Dynamic Structure of Production under a Quota: The Case of Milk Production in the Federal Republic of Germany," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 19(3), pages 283-299.
    8. Mahmud, S F & Robb, A L & Scarth, William M, 1987. "On Estimating Dynamic Factor Demands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 2(1), pages 69-75, January.
    9. Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant Size: Capital Cost Relationships in the Dry Mill Ethanol Industry," Staff General Research Papers Archive 12306, Iowa State University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agribusiness;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ags:aaea12:124915. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/aaeaaea.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.