This study analyses the economic consequences due to ethanol production in Eastern Sweden. The analyses consider the cooperative and the farmers as one vertically integrated company. The area that found the market in this study is illustrated in figure 1.
The analyses assume that all members act jointly with the objective of maximizing joint profits at the farm level as well as at the cooperative firm. A mathematical model is created to calculate the optimal use of arable land. The model takes into account the differences between regions in the market considering yield per hectare, cost of cultivation and costs due to transportation and handling of the cereals. Two scenarios are created, one without an ethanol plant in the market and one with an ethanol plant in order to analyze the effects due to investing in an ethanol plant. The analyses are carried out with two alternative locations of the ethanol plant, Västerås and Norrköping.
The results show that the economic consequences due to investing in a ethanol plant is 442 SEK per hectare if the plant is located in Västerås and 499 SEK if it’s located in Norrköping. The same results may be expressed as SEK per kilogram cereal. Expressed in this way the value is 0,087 SEK if the plant is located in Västerås and 0,099 SEK if located in Norrköping. The value may be adjusted for the direct value to producers created by the ethanol plant, in other words the value created at the producer level. This value amouts to 249 SEK (0,049 per kilogram) if the ethanol plant is placed in Västerås and 264 SEK (0,052 per kilogram) if placed in Norrköping. This value mainly originates form permitting production of wheat on fallow land, alternative use of low quality bread wheat and subsidies.
Establishing an ethanol plant in the market decreases the production of bread wheat and increases the production of ethanol wheat. The reduction of bread wheat does not affect the supply of grain to the flour mills but it has a large impact on the quantity of wheat exported from Sweden. The reduction in bread wheat production corresponds to the increase in ethanol wheat production. Statistics shows that 13 % (66 25...
