| With 24 operating ethanol plants, Nebraska is the second-largest ethanol producing state behind only Iowa. As such, ethanol production makes an important contribution to the state’s economy. A report sponsored by the Nebraska Ethanol Board showed ethanol production in 2020 contributed $4.41 billion to the state’s economy, making it the third-largest agricultural sector behind corn and cattle production. Tidbits this week checks up on the profitability of the sector given the economic uncertainty and volatility in commodity and energy markets in recent years. Figure 1 shows the estimated net returns to ethanol production from a model created at Iowa State University. The model accurately represents a typical Iowa ethanol plant constructed in the mid-2000s. While the model represents an Iowa plant, the estimates are equally applicable to plants in Nebraska. But, like all models, it should be remembered the model results are only estimates and actual returns to ethanol production will differ. The model estimates suggest 2023 was a strong year for ethanol profits. Scott Irwin, agricultural economist at the University of Illinois, noted that average profits last year were $0.29 per gallon, more than twice the long-term average of $0.12. The estimated net profit for a representative plant, $30.2 million, was the third highest since 2007. Lower corn prices and steady fuel prices played a role in the increased profits. The positive returns, though, were not sustained into the first half of this year. Returns fell below break-even, largely due to lower ethanol prices, before recovering mid-summer. Steady corn and fuel prices should mean continued positive returns for ethanol producers for the rest of the year, although global events and volatility in the energy markets could change the picture. Nebraska’s ethanol sector is one example of the interdependence of crop and livestock production and processing sectors in the state for the state’s economic benefit. It is an important customer for corn producers and a supplier of animal feed for livestock producers. The continued profitability of the sector should help prop up an otherwise struggling crop sector. |
| FIGURE 1. NET RETURNS FROM ETHANOL PRODUCTION |
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| Source: Ag Decision Maker, D1-10 Ethanol Profitability, Iowa State University Extension and Outreach*Profit net of all variable costs at a representative Iowa ethanol plant |
