WEB ONLY: The Effect of Ethanol Plant Siting on Corn Basis

Online exclusive contribution: Employing a spatial econometric model illustrates and quantifies the impact of an ethanol plant on the area corn market.
By Yehushua S. Fatal | September 24, 2013

Corn prices rose from $2.50 per bushel a decade ago to more than $7 last year. These price increases had both cause and effect relationships with ethanol: more corn demand increased corn price, while local variation in corn prices influenced the siting of ethanol plants. Further, the siting of plants influenced local variation in corn prices.

Exactly how new ethanol plant siting affects corn prices has not been well understood. Less than a handful of studies have been conducted to address this important question.

A recent study by Fatal and Thurman at the Department of Agricultural and Resource Economics at North Carolina State University has now investigated this question in depth.   READ MORE