The Impact of Biofuels Policy on Agribusiness Stock Prices

Fatma Sine Tepe, Xiaodong Du () and David Hennessy

No 60987, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: Corn markets are important for many industries. These include the seed, fertilizer, meat production/processing and agricultural machinery sectors, all of which are highly concentrated. Oligopoly theory suggests that corn input and field equipment suppliers likely benefit from policies that support corn markets, such as U.S. biofuels policy, while meat companies likely lose. This study investigates the impact of biofuels policy on U.S. agribusiness stock prices. Corn futures prices are found to have a structural change in November 2006, consistent with the expansion of U.S. biofuels policy support. A linear two-factor (S&P500 and corn prices) equilibrium asset pricing model is estimated on two subsamples, one before and one after the estimated change point. Conditional heteroskedasticity in stock returns is accounted for using a GARCH(1,1) model. In the more recent period, corn price increases are found to have positive effects on excess stock returns for seed, fertilizer and machinery companies, while the impact on meat companies is negative. The results may be interpreted as evidence that crop input suppliers gain from U.S. biofuels policies while meat processors lose.

Keywords: Agribusiness; Agricultural and Food Policy; Agricultural Finance (search for similar items in EconPapers)
Pages: 27
Date: 2010-04
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/60987/files/10 ... ssy-StockBiofuel.pdf (application/pdf)

Related works:
Journal Article: The impact of biofuels policy on agribusiness stock prices (2011)
Working Paper: The Impact of Biofuels Policy on Agribusiness Stock Prices (2011)
Working Paper: Impact of Biofuels Policy on Agribusiness Stock Prices, The (2009)
Working Paper: Impact of Biofuels Policy on Agribusiness Stock Prices, The (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:60987

DOI: 10.22004/ag.econ.60987

Access Statistics for this paper

More papers in 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().