Those factors have driven up ethanol's price rapidly. Its price has at least doubled from six months ago, often reaching more than $4 a gallon.
That's bad news for drivers, but yet another reason for the growing interest from investors. There are 101 ethanol plants operating, mostly in the Midwest, and more than 30 under construction. Far more have been proposed.
That's rapid growth for an industry that has languished since a brief boom during the energy crisis of the 1970s. Archer Daniels Midland operated nearly all the early plants, until farmers began cooperatives in the 1990s. Nearly half of today's plants are farmer-owned, but the new ones are more likely to be started by distant investors, says Brian Jennings, director of the American Coalition for Ethanol.
"We knew the ethanol industry was going to grow and expand, but it's fair to say we've been surprised by some of the interest we've seen," says Mr. Jennings.
But he and others say the ethanol boom is benefiting parts of the Midwest far beyond the actual investors, especially in small rural towns that have been losing population and income sources for years.
"The jobs at the plants are relatively good jobs," says Chuck Hassebrook at the Center for Rural Affairs in Lyons, Neb. There's also a small local boost in grain prices near ethanol plants, he says, and there's a big advantage for livestock producers in the area who can use one of the ethanol byproducts to feed their cattle.
"You're seeing a resurgence of family farms doing cattle feeding in eastern Iowa" because of the ethanol production, says Mr. Hassebrook.
That's been one benefit for Bill Couser, a farmer in Nevada, Iowa, who grows corn, raises cattle, and is an investor in Lincoln-way Energy, an ethanol plant in his town that started operating six weeks ago.