Impact of Ethanol Plant Location on Corn Revenues for U.S. Farmers

Ani L Katchova,Ana Claudia Sant’Anna

doi:10.3390/su11226512

Ani L Katchova, Ana Claudia Sant’Anna

Open Access

https://doi.org/10.3390/su11226512

Copy DOI

Abstract

Ethanol production has rapidly expanded over the past few years. The opening of an ethanol plant can increase local demand for corn, pressuring increases in local corn basis. But how does this affect corn contract prices and revenues? At the farm level, the impact of an ethanol plant on local corn contract revenues is still unknown. Data from the USDA Agricultural Resource Management Survey suggests that corn contract revenues in counties with ethanol plants are higher than corn contract revenues in counties without ethanol plants at similar prices. We estimate the impact of ethanol plants on local corn contract revenues by running non-spatial and spatial difference-in-difference models. A statistically significant effect of ethanol plant location on corn contract revenues within the same county was not found, but rather a statistically significant effect of ethanol plants on corn contract revenues for farmers located in adjacent counties. Local competitive advantage, not the presence of an ethanol plant, may be the reason for observed higher revenues in counties with an ethanol plant. Therefore, policymakers should focus their resources in promoting greater efficiency in corn production to boost farmers’ revenues.

Highlights

Biofuel markets and policies are often related to matters of national security, the environment, and food security
Non-spatial and spatial difference-in-differences models are estimated to analyze whether farmers located in the same county or adjacent to counties with ethanol plants incur additional corn revenues than those located in counties without an ethanol plant
In the spatial DID model, the coefficient associated with the spatial weight matrix and treatment dummy and the time dummy (Wdt) was statistically significant, meaning that the model did not revert to the non-spatial DID model [25]

Summary

Introduction

Biofuel markets and policies are often related to matters of national security, the environment, and food security. In the U.S, ethanol production has rapidly expanded over the last few years. From 1999 to 2017, the number of biofuel refineries increased from 50 to 213 [1,2]. Along with the increase in the number of biorefineries came an increase in the share of corn supplied to ethanol production and of corn prices (Figure 1). Increases in ethanol production may benefit local corn producers. The opening of an ethanol plant, for instance, can increase local demand for corn, pressuring increases in local corn basis [3]

Objectives

Methods

Results

Conclusion