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

Ani Katchova and Ana Claudia Sant’Anna
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Ana Claudia Sant’Anna: Division of Resource Economics and Management, West Virginia University, Morgantown, WV 26506, USA

Sustainability, 2019, vol. 11, issue 22, 1-13

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.

Keywords: biofuels; spatial difference-in-difference; corn markets (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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