The boom in ethanol production is a well-known and much-discussed phenomenon. Less understood is the profitability of all the ethanol plants built during the last decade. It is important to track the profitability of ethanol plants not only to assess investment performance in the industry but to also analyze short-term implications for the production of ethanol and use of corn as a feedstock.

In order to assess ethanol plant profitability over time, a model of a representative Iowa plant was developed. A model developed at Iowa State University by Don Hofstrand is used as a starting point. The final model incorporates these key assumptions: