IDEAS home Printed from https://ideas.repec.org/p/ags/aaea12/124915.html
   My bibliography  Save this paper

Technology, Markets, and Ethanol Plants Shutdown Price

Author

Listed:
  • Sesmero, Juan P.
  • Perrin, Richard K.
  • Fulginiti, Lilyan E.

Abstract

Price volatility and policy changes may compromise the ability of corn ethanol plants to operate above average variable cost and avoid shutdown. This study derives a variable cost function capable of accommodating two features of ethanol plants; 1) some inputs are used in fixed proportions and some are not, and 2) supply of different types of byproducts may be subject to unobservable market frictions. The function is estimated based on data from a survey of ethanol plants. Increased size does not seem to lower plants’ shutdown price. Frictions in byproduct markets seem to result in sub-optimal byproduct mix choices that increase ethanol shutdown price by up to 10 cents per gallon. Futures and other price discovery instruments in byproduct markets may enhance plants’ ability to prevent shutdown.

Suggested Citation

  • Sesmero, Juan P. & Perrin, Richard K. & Fulginiti, Lilyan E., 2012. "Technology, Markets, and Ethanol Plants Shutdown Price," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124915, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:124915
    DOI: 10.22004/ag.econ.124915
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/124915/files/124915.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.124915?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Chambers, Robert G. & Pope, Rulon D., 1993. "A Virtually Ideal Production System: Specifying and Estimating the VIPS Model," Working Papers 197785, University of Maryland, Department of Agricultural and Resource Economics.
    2. Gardner Bruce, 2007. "Fuel Ethanol Subsidies and Farm Price Support," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(2), pages 1-22, December.
    3. Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant size: Capital cost relationships in the dry mill ethanol industry," ISU General Staff Papers 200506010700001442, Iowa State University, Department of Economics.
    4. Lambert, Dayton M. & Wilcox, Michael D. & English, Alicia & Stewart, Lance A., 2008. "Ethanol Plant Location Determinants and County Comparative Advantage," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(1), pages 1-19, April.
    5. Utpal Vasavada & Robert G. Chambers, 1986. "Investment in U.S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 950-960.
    6. Perrin, Richard K. & Fretes, Nickolas F. & Sesmero, Juan Pablo, 2009. "Efficiency in Midwest US corn ethanol plants: A plant survey," Energy Policy, Elsevier, vol. 37(4), pages 1309-1316, April.
    7. Stefanou, Spiro E, et al, 1992. "Dynamic Structure of Production under a Quota: The Case of Milk Production in the Federal Republic of Germany," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 19(3), pages 283-299.
    8. repec:cup:jagaec:v:40:y:2008:i:1:p:117-135_4 is not listed on IDEAS
    9. Mahmud, S F & Robb, A L & Scarth, William M, 1987. "On Estimating Dynamic Factor Demands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 2(1), pages 69-75, January.
    10. Gallagher, Paul W. & Brubaker, Heather & Shapouri, Hosein, 2005. "Plant Size: Capital Cost Relationships in the Dry Mill Ethanol Industry," Staff General Research Papers Archive 12306, Iowa State University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juan P. Sesmero & Richard K. Perrin & Lilyan E. Fulginiti, 2016. "A Variable Cost Function for Corn Ethanol Plants in the Midwest," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(3), pages 565-587, September.
    2. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2013. "Unintended Consequences of Transportation Carbon Policies: Land-Use, Emissions, and Innovation," NBER Working Papers 19636, National Bureau of Economic Research, Inc.
    3. CARPENTIER, Alain & GOHIN, Alexandre & SCKOKAI, Paolo & THOMAS, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 96(01), March.
    4. Gebreegziabher, Zenebe & Mekonnen, Alemu & Ferede, Tadele & Kohlin, Gunnar, 2017. "Profitability of Bioethanol Production: The Case of Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 26(01), April.
    5. Deverell, Rory & McDonnell, Kevin & Ward, Shane & Devlin, Ger, 2009. "An economic assessment of potential ethanol production pathways in Ireland," Energy Policy, Elsevier, vol. 37(10), pages 3993-4002, October.
    6. Petrick, Martin & Zier, Patrick, 2012. "Common Agricultural Policy effects on dynamic labour use in agriculture," Food Policy, Elsevier, vol. 37(6), pages 671-678.
    7. Claypool, Joshua T. & Simmons, Christopher W., 2016. "Hybrid thermochemical/biological processing: The economic hurdles and opportunities for biofuel production from bio-oil," Renewable Energy, Elsevier, vol. 96(PA), pages 450-457.
    8. Jason Wood & James Nolan, 2021. "Plant location decisions in the ethanol industry: a dynamic and spatial analysis," Computational Economics, Springer;Society for Computational Economics, vol. 58(1), pages 103-132, June.
    9. Paul W. Gallagher, 2009. "Roles for evolving markets, policies, and technology improvements in U.S. corn ethanol industry development," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Apr, pages 12-33.
    10. Amigun, B. & Sigamoney, R. & von Blottnitz, H., 2008. "Commercialisation of biofuel industry in Africa: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(3), pages 690-711, April.
    11. Sanchez, Daniel L. & Callaway, Duncan S., 2016. "Optimal scale of carbon-negative energy facilities," Applied Energy, Elsevier, vol. 170(C), pages 437-444.
    12. Frank W. Agbola & Stephen R. Harrison, 2005. "Empirical investigation of investment behaviour in Australia's pastoral region," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 47-62, March.
    13. Shapouri, Hosein & Gallagher, Paul, 2005. "USDA's 2002 Ethanol Cost-of-Production Survey," Agricultural Economic Reports 308482, United States Department of Agriculture, Economic Research Service.
    14. D. Verreth & G. Emvalomatis & F. Bunte & A. Oude Lansink, 2015. "Dynamic and Static Behaviour with Respect to Energy Use and Investment of Dutch Greenhouse Firms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(4), pages 595-614, August.
    15. Petrick, Martin & Zier, Patrick, 2010. "Cap Impacts On Labour Use In East German Agriculture," 50th Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93962, German Association of Agricultural Economists (GEWISOLA).
    16. Szulczyk, Kenneth R. & McCarl, Bruce A. & Cornforth, Gerald, 2010. "Market penetration of ethanol," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(1), pages 394-403, January.
    17. Okudoh, Vincent & Trois, Cristina & Workneh, Tilahun & Schmidt, Stefan, 2014. "The potential of cassava biomass and applicable technologies for sustainable biogas production in South Africa: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 1035-1052.
    18. Gardebroek, Cornelis & Oude Lansink, Alfons G.J.M., 2008. "Dynamic Microeconometric Approaches To Analysing Agricultural Policy," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6592, European Association of Agricultural Economists.
    19. Kocoloski, Matt & Michael Griffin, W. & Scott Matthews, H., 2011. "Impacts of facility size and location decisions on ethanol production cost," Energy Policy, Elsevier, vol. 39(1), pages 47-56, January.
    20. Berhanu, Mesfin & Jabasingh, S. Anuradha & Kifile, Zebene, 2017. "Expanding sustenance in Ethiopia based on renewable energy resources – A comprehensive review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 1035-1045.

    More about this item

    Keywords

    Agribusiness;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea12:124915. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.