Are Local Corn Prices Affected by the Location of Ethanol Biorefineries?

This study examines whether the local competition for corn to produce ethanol has lead to significantly higher prices for farmers located close to ethanol biorefineries. If any, such price premiums for spatial closeness would be in addition to the general level of corn price changes experienced by farmers throughout the U.S. The difference-in-differences estimation method is used to account for both time and spatial differences in order to measure the interaction of time and spatial effects. Using the USDA’s ARMS data, the results show that while prices in real terms have changed over time, farmers located close to ethanol biorefineries have not received significantly higher prices than farmers living farther away from biorefineries. These findings indicate that there is a lack of evidence for price premiums due to spatial closeness to ethanol plants.