Shares of Archer Daniels Midland Co. (NYSE: ADM) (ADM) and VeraSun Energy Corp., (NYSE: VSE) the two biggest U.S. ethanol producers, spiked yesterday on suggestions that the newly Democratic U.S. House of Representatives might boost demand.

But not only do analysts wonder if the euphoria will be sustainable, but they question whether any U.S. producer will make money on ethanol in the near future.

Wells Fargo economist Michael Swanson, interviewed by Pioneer Press, notes today's ethanol profits are already below historical averages and projects they'll keep dropping for the next year, until ethanol is barely profitable at all. The reasons: higher corn prices, lower oil prices and a flood of new ethanol plants starting up.

Some 55 ethanol plants are under construction across America. When they're all operating, in about a year, U.S. ethanol production will soar 70 percent, analysts say, with still more to come.

"I don't think the industry can sustain that type of growth, so probably, over the next year or two years … some of these plants will falter," said Darin Newsom, a senior analyst for DTN, also interviewed by Pioneer. "It's just too many, too fast."

Cleantech.com reported late last week on a similar doomsday prediction in biodiesel. (See Biodiesel glut cometh, says analyst.)

The changing economics of ethanol are dramatic because, for much of the year, ethanol seemed to be liquid gold. Plants were so wildly profitable that everyone from local farmers to international hedge funds seemed eager to build one or buy one. Beyond generating record profits, the fever gave the ethanol industry a legitimacy, visibility and scale it had never enjoyed before.

Despite yesterday's performance by ADM and VeraSun, up 5.8% and 8.1% respectively, ethanol prices are still down 50 percent from their June peak, and so are stock prices at many ethanol companies.

If leading producer ADM is feeling the pinch, it's not letting on. Executives spoke to financial analysts in Chicago on Wednesday, and asserted that "ADM is in a category of one to capitalize on the exceptional opportunity ahead ... the future offers exceptional opportunity for a strong global player and we believe we are that global player," said CEO Patricia Woertz.

ADM continues to forecast U.S. ethanol demand of at least 14 billion gallons, well beyond the 7.5 billion gallons of renewable fuels mandated by the U.S. government by 2012.

Archer Daniels itself can currently produce 1.1 billion gallons of ethanol a year and plans to expand capacity by 50 percent by 2008 to take advantage of increased demand for the fuel, made mostly from corn in the U.S. ADM said last month that ethanol profit surged fourfold in the quarter ended Sept. 30 to $177.6 million, as prices soared.

While the day's bounce in ADM's stock price was fueled by suggestions there might be a new push in the U.S. Congress to find funding or tax incentives for alternative energy sources, John Rice, ADM executive vice president of global marketing and risk management said the outcome of Tuesday's election "won't affect us one way or the other," referring to ADM's growing ethanol business. "The U.S. is looking for alternative fuels."