The impact of ethanol plants on cropland values in the great plains

Abstract

Purpose Corn ethanol plants consume large amounts of corn and their location has the potential to alter local crop prices and surrounding agricultural land values. The purpose of this paper is to analyze the local economic impact of ethanol plant locations on farmland values. Design/methodology/approach The relationship between ethanol plant location and agricultural land prices is examined using data obtained from the Agricultural Credit Survey administered by the Federal Reserve Bank of Kansas City. Findings The findings indicate that ethanol plant location has had an impact on land values. The portion of land price changes attributable to location is consistent with previous estimates of basis changes associated with ethanol plant location. Originality/value The paper finds that land markets appear to be rationally adjusting to the location of ethanol plants.