Ethanol Makes a Comeback

  • Tuesday, 21 December 2021 09:28

Successful Farming

Dec 21, 2021

Happy days are here again at ethanol plants, with profits nearing the all-time high set in 2014.

The black ink has all but erased the industry’s bad old days of 2020 brought on by the pandemic-induced cutback in liquid fuel use.

Scott Irwin, Laurence J. Norton chair of agricultural marketing at the University of Illinois Urbana-Champaign, says the rapid rise in ethanol plant profits has brought smiles to ethanol plant operators and owners across the United States. 

“Happy days are here again is an accurate statement right now,” Irwin says. While he doubts 2021’s profit margins will top the record returns from seven years ago, he expects them to be close because of the incredible ethanol price spike that occurred in the last four months of the year. On March 28, 2014, a representative Iowa ethanol plant modeled by Irwin chalked up a record profit margin of $1.53 per gallon. In mid-November 2021, profits at the representative Iowa plant totaled $1.34 a gallon.

“We are in rarefied territory for ethanol prices and profits, and it’s happened over a pretty short period of time,” Irwin notes. “What’s really interesting is that on August 1, plants were basically operating at break-even margins. Since then, ethanol prices and profits have gone literally straight up.” At the beginning of 2021, Iowa plants were selling each gallon of ethanol for $1.39. By November, ethanol prices had more than doubled to $3.17 a gallon. 

Connie Lindstrom, senior biofuels benchmarking analyst at Christianson, PLLP, in Willmar, Minnesota, says ethanol prices have been pushed higher because ethanol demand has outpaced supplies and corn prices have stabilized since harvest began. Ethanol plants also have seen strong demand for the coproducts they produce, particularly for corn oil that is processed into renewable diesel, she adds.

Christianson, which analyzes the finances of 60 ethanol plants that account for 35% of U.S. ethanol production, also has noted that prices paid for corn have stabilized because of favorable yields from the 2021 harvest, according to Lindstrom. “We had a good corn harvest this year,” she says, “which kept corn prices stable.” The twin trends of higher ethanol demand and abundant feedstock supply should continue, she adds, “which means we should get some pretty good profitability going forward.”

Scott Richman, chief economist at the Renewable Fuels Association in St. Louis, Missouri, says the financial fortunes of ethanol plants started to turn around in August. That’s when stocks of old-crop corn were running low, corn prices were relatively high, and margins for ethanol producers were quite thin, he says. Those negative factors led to a drop in ethanol production through mid-September.


When the 2021 corn crop started arriving in September, Richman states, gasoline demand surged and ethanol plants’ profit margins rose considerably. “Since then, ethanol production has really geared up,” he says, “and we’ve been producing more than a million barrels of ethanol a day for six straight weeks, approaching all-time production records a couple of times. And because ethanol demand has remained so strong, we’ve been unable to rebuild stocks.”

Walt Wendland, president and chairman of the board of Ringneck Energy in Onida, South Dakota, says dry weather cut corn yields in the area, but the plant has been profitable because higher ethanol prices have outstripped the higher corn prices the plant is paying.

Ringneck Energy, which began production in April 2019, produces 80 million gallons of ethanol a year. After a challenging first year, Wendland says, Ringneck Energy was turning the corner financially in March 2020, when COVID-19 hit and demand for gasoline and ethanol both plummeted. “Our start-up year in 2019 was extremely challenging, but when we went into 2020, things were starting to look better until COVID hit,” Wendland recalls. “Eventually, we’ve come out of it OK, and things are looking pretty promising.”

During the depths of the economic implosion caused by the pandemic, Ringneck Energy cut production by 50% or more when there was little demand. “During the third and fourth quarters of 2020,” Wendland says, “we returned to full production.”


Corn remains the preferred feedstock for ethanol plants. In November, the USDA estimated corn used for ethanol production in the 2021-2022 marketing year to total 5.25 billion bushels, up 50 million from its previous estimate.

Because dry weather cut average corn yields in central South Dakota, where Ringneck Energy is located, the plant has been bringing in 20 to 25 railcars of corn every week to supplement the local corn it purchases for processing. The plant processes 80,000 bushels of corn a day. Local corn yields averaged about 100 to 120 bushels per acre (bpa) in 2021, Wendland notes. Normal yields are closer to 150 bpa and 190 to 220 bpa in a good year.

“We had an extended shutdown in August thinking that we’d have an early harvest in mid-September,” Wendland says, “but we had some rains that delayed the start of harvest until the first of October.” The late harvest meant that Ringneck Energy had to start using a 50-50 corn-to-milo mix for processing, although corn is the preferred feedstock for the plant’s ethanol. Milo accounts for less than 5% of the plant’s production, according to Wendland, who credits the plant’s marketing team for keeping it supplied with feedstocks, despite the dry weather.

Ethanol stocks haven’t increased because ethanol demand has risen even faster, Wendland says, and higher ethanol prices have outpaced corn prices. Ringneck Energy ships 60% of its ethanol on the BNSF Railway to the West Coast, and 40% of its ethanol goes to markets in the South and western United States, he adds. 

The company sells wet distillers’ grains to local cattle-feeding and cow-calf operations in the area, which means it saves on natural gas expenses by not having to dry the distillers’ grains.

“Corn oil prices have been unbelievable,” Wendland notes, because of renewable diesel demand. “That’s been a real growth market for our corn oil and an industry-wide focus for increasing profits.” Ringneck Energy has capitalized on those high prices by increasing its corn oil yields by 50%, he says.


Steve Roe, general manager and CEO at Little Sioux Corn Processors, LLC, in Marcus, Iowa, says the plant had one of its best quarters ever in the third quarter of 2021 and the fourth quarter looks to be even better.

As for 2022, “I don’t see how we are going to have as good a year as we’ve had in 2021,” he notes. “I just don’t think these large returns are sustainable.”

Exports are the wild card for 2022. “Export prospects look promising because oil prices are high worldwide, so that will push ethanol exports up as people substitute ethanol for gasoline,” Roe says. Domestic demand for ethanol will be 14.5 billion gallons in 2021 based on the amount of gasoline consumed. With U.S. ethanol production expected to exceed 15 billion gallons this year, exports are going to have to make up the difference, he adds. 

Domestic demand is expected to remain high.

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