IDEAS home Printed from https://ideas.repec.org/p/ags/aaea26/404321.html

Market Concentration, Supply Chain Resilience, and Producer Welfare: Lessons from The U.S. Ethanol Processing Industry

Author

Listed:
  • Tian, Yixin
  • Shanoyan, Aleksan

Abstract

Economic theory suggests that processor concentration typically harms agricultural producers through buyer monopoly power. However, long-run models indicate that highly concentrated processors may act as a buffer during severe supply chain disruptions. The low water levels on the Mississippi River in the fall of 2022 led to a significant decline in barge capacity, disrupting export channels for inland farms. This provided a natural experiment to test this theoretical trade-off. Using weekly county-level panel data on corn basis differentials across seven U.S. states during harvest weeks from 2018 to 2024, we employ a difference-in-differences approach to isolate the impact of local ethanol processor concentration, represented by the Herfindahl-Hirschman Index (HHI), during the shock period. The model strictly controls for distance from the Mississippi River and local drought severity to ensure that the HHI mechanism operates independently. We find strong evidence of a buffering effect: during the crisis, a 5,000-point increase in the HHI was associated with an increase of approximately $0.04 per bushel in the basis. This effect exhibits significant spatial heterogeneity: it is dominant in states deep inland (Kansas, NorthDakota, SouthDakota, Nebraska); in river in estates (Missouri, Oklahoma, Texas), the basis is primarily influenced by distance from the river. However, tests of the transmission mechanism using farm-level panel data from Kansas indicate that this loca lprice buffer did not translate into higher net farm income. In particular, for corn-dependent farms, drought-induced yield losses ultimately offset the price gains from the basis phase. Ultimately, these findings provide key parameters regarding the benefits of price buffering that are currently missing from the antitrust framework. This suggests that highly concentrated processors in inland regions actually serve as a critical regional buffer. Antitrust policymakers should consider the positive impact of processor concentration on supply chain resilience, especially in the inland states.

Suggested Citation

  • Tian, Yixin & Shanoyan, Aleksan, 2026. "Market Concentration, Supply Chain Resilience, and Producer Welfare: Lessons from The U.S. Ethanol Processing Industry," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404321, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404321
    DOI: 10.22004/ag.econ.404321
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/404321/files/177450_194904_115232_AAEA_Manuscript_June1.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.404321?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
    ---><---

    References listed on IDEAS

    as
    1. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    2. AM Alvarez & EG Fidalgo & RJ Sexton & M Zhang, 2000. "Oligopsony power with uniform spatial pricing: theory and application to milk processing in Spain," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(3), pages 347-364, September.
    3. Ashok K. Mishra & Barry K. Goodwin, 1997. "Farm Income Variability and the Supply of Off-Farm Labor," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 880-887.
    4. Joseph W. Glauber, 2013. "The Growth Of The Federal Crop Insurance Program, 1990--2011," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 482-488.
    5. Nathan D. DeLay & Brady Brewer & Allen Featherstone & David Boussios, 2023. "The impact of crop insurance on farm financial outcomes," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 579-601, March.
    6. Marten Graubner & Alfons Balmann & Richard J. Sexton, 2011. "Spatial Price Discrimination in Agricultural Product Procurement Markets: A Computational Economics Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 949-967.
    7. Ashok K. Mishra & Hisham S. El‐Osta & Carmen L. Sandretto, 2004. "Factors affecting farm enterprise diversification," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 64(2), pages 151-166, November.
    8. Nigel Key & Michael J. Roberts, 2009. "Nonpecuniary Benefits to Farming: Implications for Supply Response to Decoupled Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 1-18.
    9. Jeffrey Hadachek & Meilin Ma & Richard J. Sexton, 2024. "Market structure and resilience of food supply chains under extreme events," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(1), pages 21-44, January.
    10. Xiaodong Du & Hongli Feng & David A. Hennessy, 2017. "Rationality of Choices in Subsidized Crop Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(3), pages 732-756.
    11. Xiaodong Du & Hongli Feng & David A. Hennessy, 2017. "Rationality of Choices in Subsidized Crop Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(3), pages 732-756.
    12. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    13. Youngjune Kim & Jisang Yu & Dustin L Pendell, 2020. "Effects of crop insurance on farm disinvestment and exit decisions [Effects of differing farm policies on farm structure and dynamics]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 47(1), pages 324-347.
    14. Richard J. Sexton, 2013. "Market Power, Misconceptions, and Modern Agricultural Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 209-219.
    Full references (including those not matched with items on IDEAS)

    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. Nordmeyer, Eike Florenz & Danne, Michael & Musshoff, Oliver, 2023. "Can satellite-retrieved data increase farmers' willingness to insure against drought? – Insights from Germany," Agricultural Systems, Elsevier, vol. 211(C).
    2. Radosław PASTUSIAK & Magdalena JASINIAK & Michał SOLIWODA & Joanna STAWSKA, 2017. "What may determine off-farm income? A review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(8), pages 380-391.
    3. Jinho Jung & Juan Sesmero & Ralph Siebert, 2022. "A structural estimation of spatial differentiation and market power in input procurement," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 613-644, March.
    4. Mingyu Hu & Fujin Yi & Hong Zhou, 2026. "Stepping stone or stumbling block: Anchoring effect of crop insurance subsidies," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 74(1), pages 14-34, March.
    5. Tim Philippi & Jörg Schiller, 2024. "Abandoning disaster relief and stimulating insurance demand through premium subsidies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 91(2), pages 339-382, June.
    6. Marasteanu, I. Julia & Jaenicke, Edward C., 2013. "Agglomeration and Spatial Dependence in Certified Organic Operations in the United States," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149551, Agricultural and Applied Economics Association.
    7. Chen, I-Chun & Du, Xiaodong & Mitchell, Paul D., "undated". "Policy Implications of Joint versus Separate Estimation of Crop Insurance Demand," 2018 Annual Meeting, August 5-7, Washington, D.C. 273878, Agricultural and Applied Economics Association.
    8. Zavelberg, Yvonne & Heckelei, Thomas & Wieck, Christine, 2016. "Entry deterring effects of contractual relations in the dairy processing sector," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(01), pages 1-16, April.
    9. Marasteanu, I. Julia & Liang, Chyi-Lyi (Kathleen) & Goetz, Stephan & Ahearn, Mary Clare & Brown, Jason P., 2013. "The Identification and Formation of Clusters of Northeastern United States Farms Participating in Multifunctional Activities," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149573, Agricultural and Applied Economics Association.
    10. Yu, Qiuyun Cecilia & Li, Qi & Orduña Alegría, Maria Elena & Marston, Landon T., 2026. "The impact of short-term and long-term risk reduction measures on irrigator strategies and profitability," Agricultural Water Management, Elsevier, vol. 324(C).
    11. Jisang Yu & Edward D. Perry, 2024. "Premium subsidies and selection in the federal crop insurance program," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(1), pages 280-297, February.
    12. Prasenjit N. Ghosh & Ruiqing Miao & Emir Malikov, 2023. "Crop insurance premium subsidy and irrigation water withdrawals in the western United States," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 968-992, October.
    13. Bas Scheer & Wiljan van den Berge & Maarten Goos & Alan Manning & Anna Salomons, 2022. "Alternative Work Arrangements and Worker Outcomes: Evidence from Payrolling," CPB Discussion Paper 435, CPB Netherlands Bureau for Economic Policy Analysis.
    14. Ying Liu & Hongyun Huang & William Mbanyele & Fengrong Wang & Huiling Liu, 2024. "Does the issuance of green bonds nudge environmental responsibility engagements? Evidence from the Chinese green bond market," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-42, December.
    15. Banasaz, Mohammadmahdi & Bose, Niloy & Sedaghatkish, Nazanin, 2025. "Identification of loan effects on personal finance: A case for small U.S. entrepreneurs," Journal of Economic Behavior & Organization, Elsevier, vol. 234(C).
    16. Mac Clay, Pablo & Börner, Jan & Sellare, Jorge, 2023. "Institutional and macroeconomic stability mediate the effect of auctions on renewable energy capacity," Energy Policy, Elsevier, vol. 180(C).
    17. Katrin Huber & Geske Rolvering, 2023. "Public child care and mothers’ career trajectories," Working Papers 228, Bavarian Graduate Program in Economics (BGPE).
    18. Zeng, Chenyu & Wei, Xiahai & Yu, Lingzheng, 2026. "The Commuter’s dividend: Dockless bike sharing and wage premium in urban labor market," Journal of Asian Economics, Elsevier, vol. 102(C).
    19. Hueth, Brent & Taylor, Christopher W., "undated". "Spatial Competition in Agricultural Markets: A Discrete-Choice Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150506, Agricultural and Applied Economics Association.
    20. Francesco Vidoli, 2026. "The Geography of Impact: Endogenous Spatial Clustering for Difference-in-Differences Estimation," Working Papers 2601, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2026.

    More about this item

    Keywords

    ;

    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:aaea26:404321. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    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.