SPATIAL COMPETITION AND ETHANOL PLANT LOCATION DECISIONS

Ethanol is one of the fastest growing industries in the U.S. agricultural sector. This study estimates factors that impact location decisions by new ethanol plants using logistic regression analysis and spatial correlation techniques. The results indicate that location decisions are impacted by the agricultural characteristics of a county, competition, and state-level subsidies. Spatial competition is particularly important. Existence of a competing ethanol plant reduces the likelihood of making a positive location decision and this impact decreases with distance. Finally, state-level subsidies were significant and a very important variable impacting ethanol location decisions.