The Impacts of an Ethanol Plant Placement on Cotton Acreage in the Texas High Plains

Abstract

This study examines the impacts of a sorghum-based ethanol plant established in a major cotton producing area on local sorghum basis and cotton acreage distribution using county-level panel data from 2002 to 2014. Spatial econometric models are employed to account for any spatial dependence. Our results support the conclusion sorghum basis and cotton acreage within a county depends on characteristics of its neighbors. Specifically, the findings indicate that the sorghum basis increased by 1.5 cents per bushel in the short-run resulting from hosting a 40-million-gallon ethanol plant, and a short-run increase by 0.2 percent in cotton acres over all counties.

Keywords: cotton acreage, ethanol plant location, ethanol production, sorghum basis, spatial models

JEL Classification: C31, Q16, Q18, R12