Back in the salad days of ethanol production, Otter Tail Ag Enterprises raised $42.2 million in just 10 days to build a plant near Fergus Falls. It was March of 2006, and nearly 900 Minnesota investors -- 60 percent of them farmers -- wanted a piece of the 55 million-gallon plant that opened this past March, chief executive Kelly Longtin said. Just as optimistically, lenders approved the other $82 million the project needed.

It's not something Longtin would like to float these days, when neither investors nor lenders are as bullish on the biofuel. The recent flooding in Iowa is just the latest in a series of forces shoving ethanol's main ingredient -- corn -- to record high prices that have squeezed if not erased industry profits.

It's quashed the ethanol boom of two years ago and left the industry in shambles, with operators postponing building of plants, and even delaying indefinitely the start-up of plants that have recently been completed. A growing chorus of legislators and energy experts in Washington is questioning a new round of federal mandates for ethanol production passed last December and debating suspending them or rolling them back.

But in Minnesota, ethanol producers are far more confident about their futures. The state's early start with ethanol -- the first plant opened in 1994 -- means many plants don't have the heavy debt loads of new plants. Technology that's making the plants more efficient also is helping them hold on until corn prices fall again, as many expect. And unlike many of the new plants, built by large companies and anonymous investors, most of Minnesota's plants are at least partially owned by farmers, giving the owners a significant hedge.

When corn nears $8 a bushel -- as it has recently -- their ethanol holdings suffer, but they're making good money on their crop. Or, as they did during the 1996-97 drought, farmers can take a lower price temporarily on their corn to keep their own ethanol plants running, said David Morris, head of the Institute for Local Self-Reliance in Minneapolis.

Last year, 90 percent of the new plants were outside of Minnesota, and 90 percent of them had absentee owners -- not area farmers, Morris said. He estimates that the debt on new plants can add 20 to 30 cents a gallon to costs compared with some of Minnesota's older plants.

"I think you're going to see some companies start to lose money, and then they'll shut themselves down," said Todd Taylor, a renewable fuels attorney at Fredrikson & Byron in Minneapolis. "It won't take out most ethanol plants, but it will affect the weak ones."

The Iowa floods' impact on corn prices is probably more psychological than actual, Taylor said, coming on top of other forces that have been hurting the industry for months: growing demand from places like China and India, the cheap dollar, and the rush of investment speculators to the commodities markets.

The latest financial filing of Granite Falls LLC indicates how the numbers have turned on ethanol producers. It shows a $7.33 million drop in revenue for the six months ending April 30, to $43.32 million, compared with the same period last year. Over the same time, costs went up $5.54 million to $39.91 million -- with most of the blame going to "significantly higher corn prices," the report said.

Still, the floods also took 400 million gallons of ethanol production offline in Iowa, which could be some boon to Minnesota producers, Taylor said.

Ethanol is a $3 billion-a-year industry in Minnesota, supporting 11,000 jobs, according to the state Department of Agriculture. This year's production capacity is 730 million gallons; 22 percent of the state's corn crop will go to ethanol.

Waiting for improvement

Of course, Minnesota will still feel some fallout of the current crunch. Agassiz Energy, in Crookston, tried earlier this year to gather the kind of investor support Otter Tail Ag had, but stalled after months of effort and only about $500,000 in commitments, Agassiz's attorney said.

Brookings, S.D.-based VeraSun last week indefinitely postponed operations at a 110 million-gallon ethanol plant in Welcome, which a spokesman said is "substantially completed" and was originally set to start production this month. Spokesman Michael Lockrem said the company is keeping its 55 Welcome employees on the payroll, and it plans to open the plant when "market conditions improve." VeraSun doesn't disclose capital costs, but industry observers estimate that plants of that size typically cost between $150 million and $200 million.

Its Janesville plant, also slated for 110 million gallons a year, is still scheduled -- so far -- to open in the fourth quarter of this year.

Survival depends on keeping costs low. Morris said most Minnesota plants now are somewhere between making 10 cents and losing 10 cents a gallon.

At Otter Tail Ag, one of Longtin's strategies was to start buying corn last October, long before corn -- more than 70 percent of his costs -- approached $8 a bushel. He declined to talk specifics except to say, "we're sitting pretty good."

At Corn Plus, in Winnebago, general manager Keith Kor said its low debt and constant investment in technologies keep its costs low. One of Minnesota's first ethanol plants, Corn Plus has about 750 member/owners, 80 percent of them farmers, and its capacity is 49 million gallons.

"We are less vulnerable," Kor said.

H.J. Cummins • 612-673-4671