The impact of biofuels policy on agribusiness stock prices

Tepe, Fatma Sine; Du, Xiaodong; Hennessy, David A.

doi:10.1002/agr.20265

Cited by 4 publications

(6 citation statements)

References 26 publications

(18 reference statements)

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“…One report by the U.S. Agriculture department determined that every $1 spent subsidizing ethanol costs consumers more than $4.'' Recent analysis (Tepe et al 2009) seems to evidence that crop input suppliers gain from US biofuels policy while meat processors lose (Tepe et al 2009). So, it seems that those who will gain from subsidies are large corporations that sell the fossil-fuels-derived inputs, and the losers are the farmers, the consumers, and the tax payers!…”

Section: Not Only North-southmentioning

confidence: 93%

“…Federal and state subsidies for ethanol production that total more than $7 per bushel of corn are mainly paid to large corporations (McCain 2003;Burnett 2005;Peterson 2009;Tepe et al 2009), while corn farmers are receiving a maximum of only an added 2¢ per bushel for their corn (or about $2.80 per acre) in the subsidized corn ethanol production system (Pimentel and Patzek 2005). Burnett (2005) summarized it quite strictly stating that: ''Yet, more than two decades and tens of billions of dollars in subsidies, tax credits and fuel mandates have done little other than to further enrich Archer-Daniels Midland (ADM), the multibillion dollar agri-giant that produces more than 70% of the ethanol used in America.…”

Section: Not Only North-southmentioning

confidence: 99%

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Biofuels: Efficiency, Ethics, and Limits to Human Appropriation of Ecosystem Services

Gomiero

Paoletti

Pimentel

2009

J Agric Environ Ethics

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Biofuels have lately been indicated as a promising source of cheap and sustainable energy. In this paper we argue that some important ethical and environmental issues have also to be addressed: (1) the conflict between biofuels production and global food security, particularly in developing countries, and (2) the limits of the Human Appropriation of ecosystem services and Net Primary Productivity. We warn that large scale conversion of crops, grasslands, natural and semi-natural ecosystem, (such as the conversion of grasslands to cellulosic ethanol production, or plantation of sugar cane and palm oil), may have detrimental social and ecological consequences. Social effects may concern: (1) food security, especially in developing countries, leading to an increase of the price of staple food, (2) transnational corporations and big landowners establishing larger and larger landholdings in conflict with indigenous areas and the subsistence of small farmers. Ecological effects may concern: (1) competition with grazing wild and domesticated animals (e.g., millions of grazing livestock in USA prairies), (2) an excessive appropriation of Net Primary Production from ecosystems, (3) threatening biodiversity preservation and soil fertility. We claim that is it well known how ecological and social issues are strictly interwoven and that large scale biofuels production, by putting high pressure on both fronts, may trigger dangerous feedbacks, also considering the critical fact that 9 billion people are expected to inhabit the planet by 2050. There is a need to conduct serious and deep analysis on the environmental and social impact of large scale biofuels production before important energy policies are launched at global level. Biofuels will not represent an energetic panacea and their role in the overall energy consumption will remain marginal in our present highly energivorous society, while their effect on food security and environment preservation may have detrimental results. We should also have the courage to face two key issues: (1

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Section: Not Only North-southmentioning

confidence: 93%

Section: Not Only North-southmentioning

confidence: 99%

Biofuels: Efficiency, Ethics, and Limits to Human Appropriation of Ecosystem Services

Gomiero

Paoletti

Pimentel

2009

J Agric Environ Ethics

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“…They find a positive relationship between confidence and stock market performance. Tepe et al (2009) find that US biofuel policy tended to increase the stock returns for seed, fertilizer and machinery companies, while cutting the performance of meat processing firms.…”

Section: Introductionmentioning

confidence: 96%

Regulation and the financial performance of Canadian agribusinesses

Schaufele

Sparling²

2011

Agricultural Finance Review

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Purpose -The purpose of this paper is to investigate the relationships between regulatory changes, returns on equity and stock market valuations for Canadian food and non-food agribusinesses. Design/methodology/approach -Two empirical approaches are employed. First, an event study is used to evaluate the impact of official regulatory announcements on the stock market valuations of selected Canadian agribusinesses. Next, an approach introduced by Mishra et al. using the Du Pont expansion is applied to investigate the effect of regulations on firms' accounting profits. Data on Canadian food and non-food agribusinesses are collected from Bloomberg, Thompson One Banker and SEDAR. Findings -The event study demonstrates that official regulatory announcement dates do not correspond with abnormal stock market returns for Canadian firms, while the Du Pont model yields mixed evidence with respect to their accounting profits. Research limitations/implications -This paper only considers publicly traded companies. As a result, survivorship bias may exist. Future research should include privately held and cooperative firms. Social implications -Food regulations can influence firm profits and shareholder wealth, so understanding how government actions influence agribusiness is important when considering the total costs of current and future food policy. Originality/value -The interaction between policy and the financial performance of Canada's publicly traded agribusinesses is an under-researched area and no studies have examined Canadian data. The results of this study are valuable to both policy makers and researchers.

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“…For example, Tepe et al. () investigate the effect of domestic biofuel policy on U.S. stock prices, while Pendell and Cho () study reactions by investors in Korean agribusiness stocks following five outbreaks of foot‐and‐mouth disease. We consider a much larger set of variables to study the factors that drive stock market integration.…”

Section: Introductionmentioning

confidence: 99%

What drives stock market integration? An analysis using agribusiness stocks

Valdés

Cramon‐Taubadel

Engler

2016

Agricultural Economics

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This article explores the drivers of regional stock market integration with a focus on the agribusiness sector across relevant regional trade blocs around the world. We implement panel cointegration models to analyze the stock indices of agribusiness firms in the Southern Common Market (MERCOSUR), European Union (EU), Asia-Pacific Economic Cooperation (APEC), and North American Free Trade Agreement (NAFTA). Based on the literature on market integration and stock return pricing, we identify nine possible determinants of stock market integration, which we separate into three categories: individual market performance, macroeconomic conditions, and agricultural trade. In our analysis, we account for agriculture-specific factors to control for possible structural shifts in financial markets regimes by including the two main commodity price bubbles during last 20 years. Our results show that most of the variables included in our categories have been important factors in promoting regional stock market integration. Moreover, integration among regional stock markets was strengthened by the implementation of trade agreements. This effect is stronger in trade blocs with fewer members, such as NAFTA and MERCOSUR, compared with larger and more heterogeneous blocs, such as the EU and APEC.JEL classifications: F36, G15

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The impact of biofuels policy on agribusiness stock prices

Cited by 4 publications

References 26 publications

Biofuels: Efficiency, Ethics, and Limits to Human Appropriation of Ecosystem Services

Biofuels: Efficiency, Ethics, and Limits to Human Appropriation of Ecosystem Services

Regulation and the financial performance of Canadian agribusinesses

What drives stock market integration? An analysis using agribusiness stocks

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