Ethanol Plant Siting and the Corn Market

Corn-based ethanol production has affected U.S. agriculture in general and the corn market in particular for the last several years. This study provides practical insights on the linkage formed between the two industries. The study aims to answer questions related to ethanol industry growth such as: where will the next ethanol plants be located, what will be their capacities, and what will be the plant siting effect on corn supply and price in the plants' regions? Some of these questions have never been addressed in the literature while some have only been casually researched.;The first chapter of the dissertation provides background on the ethanol industry. The second chapter investigates how changes in ethanol plant capacity affect corn supply geographically around the plant. The study is based on a county-level analysis of the 48 contiguous states for the years 2002-2008. The empirical analysis uses a non-linear least squares (NLS) model for estimating the key parameters and accounts for spatial autocorrelation. The results indicate that locating an ethanol plant in a county stimulates additional acres of planted corn within a 286-mile radius around the plant. An additional one million gallons of annual ethanol capacity is estimated to increase planted corn by 5.21 acres in the county in which the plant is located. This effect diminishes linearly to zero as the distance between the plant and other counties approaches 286 miles. In order to establish confidence intervals for the NLS estimators I utilize both residual and block bootstrap techniques. To account for spatial autocorrelation across counties, I employ a spatial error model.