Understanding Spatial Welfare Impacts of a Grain Ethanol Plant

A changing world of increasing complexity, fluctuating prices, high energy costs and limited data necessitate creative blending of economic theory and available empirical statistics to understand the welfare impacts in a specific market. In this paper, a programming approach is used in tandem with spatial economic theory to understand the spatial welfare impacts of an ethanol plant established in an area with a beef feeding industry. The study concludes that corn transportation costs are less significant in plant pricing strategy than originally identified by other studies. Local ethanol plant competition is found to explain the lower-than-feed value pricing of ethanol byproducts at the plant. In the study, average welfare effects are calculated for the ethanol plant, corn producers and beef producers under different market situations and changes.