The paper’s objective is to check the economic feasibility of using a recycled material for ethanol production in a small agricultural distillery and of the environmental consequences of this operation. Using bakery waste as raw material for distillation seems to be a plausible solution for the still surviving agricultural distilleries. Some test runs on the full production scale have been performed. The methodology for this research included simple cost calculations and comparisons on the example of a typical small agricultural distillery. A sufficient supply can be secured in the vicinity of a big bakery. Sale of the produced ethanol may be facilitated due to the state regulations requiring a growing percentage of ethanol content in the transportation gasoline. The distillery effluents can be utilized as a component of animal feed and also as an agricultural fertilizer or as a raw material for biogas or butanol production, though a complete utilization is still dubious. The deal with new raw material in the agricultural distillate production has proved to be economically feasible for both the supplying bakery and the distillery in a typical case analysed in the paper. The cost of raw material for the distillery was more than 10 times less than in the case of processing rye or maize grain. This turns the ethanol production from unprofitable into profitable. The net cost for the bakery was null and it is getting significant savings in the cost of a traditional way of waste disposal. Various possible extensions to the agricultural utilization of waste from the distillate production are also indicated with a preliminary evaluation of their viability, hardly attainable in small distilleries.