Title: Does the USA have market power in importing ethanol from Brazil?
Authors: Sunil P. Dhoubhadel; Azzeddine M. Azzam; Matthew C. Stockton
Department of Agriculture, Fort Hays State University, 218 C Albertson Hall, 600 Park Street, Hays KS 67601, USA
Department of Agricultural Economics, University of Nebraska-Lincoln, 103E Filley Hall, Lincoln, NE 68503-0922, USA
West Central Research & Extension Center, University of Nebraska-Lincoln, 402 W State Farm Road, North Platte, NE 69101-7751, USA
Abstract: With the ever increasing requirement in the USA to blend higher volumes of advanced biofuels with gasoline and the shortfall in domestic production to fulfil this requirement, imports of ethanol from Brazil will likely take on an even more vital role. In this paper, we examine US buyer power over Brazil. For methodology, we estimate the sugarcane ethanol residual supply function facing the USA. We find that while the USA had buyer power before the enactment of the advanced biofuels mandate, that buyer power disappeared after the mandate. One possible explanation is that, given that Brazil is the primary source of the sugarcane ethanol, the mandate requirement has increased rivalry between the USA and the remaining importers, creating a perfect market overlap between the rivals.
Keywords: ethanol imports; market power; residual supply elasticity; trade policy.
Int. J. of Trade and Global Markets, 2017 Vol.10, No.2/3, pp.251 - 266
Available online: 22 Aug 2017