Land Value Impacts of Ethanol Market Expansion by Irrigation Status

We examine capitalization of ethanol plant construction and capacity expansion into surrounding irrigated and non-irrigated farmland values using data on every land transaction in Kansas from 1995 to 2017 in a hedonic price model. We hypothesize that corn prices and thus land values are higher near ethanol plants. We further hypothesize that ethanol market expansion is capitalized into irrigated parcels to a greater extent than into nonirrigated parcels due to differences in water demand and precipitation. We estimate that an irrigated (nonirrigated) parcel within 50 km of an ethanol plant experiences an average price premium of 8.8% (6.3%) relative to more distant parcels.