By: Connie Lindstrom, Director of Benchmarking, Benchmark Insights, LLC
As favorable margins, solid demand, and robust low-carbon tax incentives converge, 2026 promises continued above-average profitability for ethanol producers. After several years of stagnant earnings in the $0.20-$0.25 per gallon range, average earnings before interest, taxation, depreciation, and amortization (EBITDA) ticked up 10 cents or more in the latter half of 2025, to nearly $0.35 per gallon, with top-quartile performers averaging close to twice that. Much of the improvement was driven by early profits from monetization of 45Z tax credits, with a boost from increased demand at the pump for higher ethanol blends.
We’ve been through this cycle before. Benchmark Insights (formerly Christianson Benchmarking) has collected industry data since 2003, and we’ve seen that, like most commodity-driven industries, boom and bust cycles in plant profits are the expectation, not the exception. 2006 and 2014 (and to a lesser extent, 2011 and 2021) saw plant profits spike, due to favorable market conditions and regulatory factors. Each of these peak times was followed by at least one year, and sometimes several years, of sharp declines in profits. During each of those downturns, the U.S. industry consolidated: some plants sold to larger entities or shut down altogether, while others added capacity and capabilities which helped them diversify and weather future downcycles.
Why do some producers flourish despite periodic, unavoidable lean years, while others falter? As part of our biofuels benchmark analysis, our team is often asked how the data can help answer this question. Although, of course, there isn’t a single, simple answer, the reason often boils down to effective strategic planning and use of profits during upswings. Having 5-year, 10-year, and lifecycle plans helps boards and executive leadership teams build a long-range business vision with their shareholders, which allows for smart use of boom-year dollars while assuring solid investment returns across the ever-fluctuating commodity price cycle.
Most ethanol plants were built decades ago—many have used past periods of strong cash flow to pay down debt and build cash reserves. With balance sheets in good shape, investors and shareholders expect to work with leadership to develop a roadmap for what’s next. Does that look like investment in developing efficiencies and lowering carbon scores, to further capitalize on the low-carbon opportunities of the future? Does it require production capacity increases or plant acquisitions to strengthen a regional footprint? Or perhaps the anticipated profitability from tax incentives should be used to solidify shareholder trust and shore up the local grower-investor network, via increased dividends or pass-through tax credits to shareholders.
In any case, these questions can only be answered with careful review of each facility’s strengths and challenges in the marketplace. It may seem tempting to put off tough decisions for the times when profits are slim, but the opposite tactic is actually much more effective. If you’ve got good prospects for a few years ahead, avoid missteps by making time to talk with your team now about where you expect to be in a decade.