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University of Florida
Levin College of Law

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Monday, November 17, 2008

FTC Report on Ethanol Market Concentration

Posted by D. Daniel Sokol

The FTC has released its 2008 Report on Ethanol Market Concentration.  From the FTC press release:

The Commission has issued the report, “2008 Report on Ethanol Market Concentration.” This is the Commission’s fourth annual report on the state of ethanol production in the United States, as required by the Energy Policy Act of 2005. The report concludes that the U.S. fuel ethanol market, measured on the basis of production or capacity, remains unconcentrated.

As of September 2008, 160 firms produced ethanol in the United States – a one-year increase of 57 firms. The largest ethanol producer’s share of capacity has continued to fall each year as new firms have entered the market and existing firms have added capacity. Currently, the largest producer accounts for approximately 11 percent of domestic ethanol capacity, down from 16 percent in 2007, 21 percent in 2006, 26 percent in 2005, and 41 percent in 2000.

FTC staff used three different methods to calculate concentration of the ethanol production industry. Specifically, staff calculated concentration based on the production capacity of each individual producer, on the production capacity of each producer when attributing that producer’s capacity to the firm responsible for marketing the producer’s ethanol, and on actual production rather than capacity. The report concludes that the level of concentration in ethanol production would not justify a presumption that a single firm, or a small group of firms, could wield sufficient market power to set or coordinate price or output levels. In addition, the ease of entry by new firms and the availability of ethanol imports provide additional constraints on current market participants.

             

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