Profits could disappear from the corn ethanol industry by the end of this year, said researchers at Iowa State University, in the latest of a string of doomsday predictions for the industry.

"We think the expected returns to an ethanol plant are zero or negative in 2008," said Bruce Babcock, economist and director of the Center for Agricultural and Rural Development at Iowa State, in Ames, Iowa.

Babcock cited the rising prices of corn feedstock, increased supplies of the fuel and falling prices as contributing to a negative return on investment.

Approximately eighty corn ethanol plants are under construction in the U.S. alone, according to Babcock. And corn-based ethanol output has been growing fast; this year, U.S. plants will yield about 6 billion gallons.

"As we move beyond six, seven, eight billion gallons, we think the price will drop," Babcock said. "As the prices drop, the margins drop. We think that will turn off investment."

Babcock and his colleagues forecast that ethanol production will reach 11 billion gallons next year and peak at 14 billion by 2010. Their forecast calls for almost no growth in production in the six years thereafter.

The shape of the corn ethanol output curve is not unlike one shown by Vinod Khosla over the last year (his graphic is reproduced in Cleantech.com's column Venture capital biofuel bubblewatch.)

Even with the current 51-cent-a-gallon federal subsidy in the U.S., Babcock said, profits will be hard to come by in the years ahead—especially for newcomers still building their plants.

It's the latest in a long line of developments and forecasts reflecting negatively the profitability of conventional ethanol. For instance, read Cleantech.com's Study: U.S. near corn-based ethanol tipping point, Ethanol sector slapped on bad VeraSun earnings, and Corn ethanol crisis looming, says watchdog.

Calls to leading ethanol makers for their reaction to Iowa State's forecast went unreturned.

Biofuels industry observer Robert Rapier (author of Cellulosic ethanol vs. biomass gasification) told Cleantech.com that problems in corn ethanol had been clear since last summer.

"Capacity was being built well in excess of the mandated amounts. This ends up squeezing producers on both ends. I have been predicting for at least a year now that there will either be a massive shakeout of ethanol producers—or more likely there is going to be a massive bailout by the government. I also see a high probability that the mandated numbers will be increased to help the producers."

"To the ethanol producers, I say, 'welcome to the cyclical energy industry, boys.' If they weren't being protected from the true economics by the subsidies and mandates, the industry would implode. They simply don't have a good enough energy return to compete with fossil fuels."

The leader of the Renewable Fuel Association, however, said the Iowa State researchers are overstating the case for an ethanol glut in the years ahead.

"Looking at a static marketplace, Professor Babcock might be right. But this is not a static marketplace," said Bob Dinneen, president and chief executive of the Washington trade group.

While ethanol-dominant fuel blends like E85 aren't widely available yet, as many as 4.5 million new E85 vehicles are being sold every year, Dinneen said, with half America's vehicles expected to be able to use E85 by 2020.

And the growing number of E85 vehicles will spur service stations to sell the fuel.

"Consumers are looking for options and flexibility," Dinneen said. "They're looking to be empowered, to be able to power their vehicles with something other than petroleum."

Leading American corn ethanol companies include ADM (NYSE: ADM) VeraSun (NYSE: VSE) and Poet, previously Broin Companies.