Earlier this year, the food versus fuel fight raged as corn and soybean prices reached record highs.
Today, commodity and oil prices have decreased 50pc with the recent market fallout and declining worldwide demand.
However, the United States consumer price index for food is still expected to increase 7-9pc in 2009.
Led by the Grocery Manufacturers Assn, US food companies and the livestock industry have launched a campaign to dismantle the country's biofuel policy.
Livestock producers claim that using corn for ethanol production drives feed costs higher.
- Economist s say food inflation will rise 7-9pc
- Feed costs take 18-24 months to reach consumers
- Food companies blame ethanol for rising prices
Bill Lapp, principal with Advanced Economic Solutions, said sometimes, an increase in feed costs has a lag time of 18-24 months before reaching the consumer.
Although commodity prices have declined from their peak levels, they remain well above their historic norms.
Corn futures today are close to $US4, nearly half of the June peak but still 60pc above their long-term average.
Chicken production is down 10-12pc, turkey production is about to drop at double-digit rates early next year, the sow herd is being culled and there are 5pc fewer cattle on feed.
Total meat production is forecasted to be down significantly in 2009, meaning "consumers are going to have less meat, and they're going to be paying higher prices", according to Tom Elam, president of FarmEcon LLC.
Mr Elam noted that not one of the chicken, turkey, pork or beef industries is making positive profits today because they have not passed along their cost increases to wholesale prices.
"Therefore, because the wholesale prices have not gone up, the retail prices, by and large, have not gone up as much as they will, even though retail prices have tended to increase, as we've seen on a lot of products this year," he said.
"So, as those costs are passed along, we will see the increase in retail prices we've seen this year continue on through 2009 and probably into 2010."
Mr Elam said the link between oil prices and agricultural commodities is new as of 2007, and it's a major game changer for those in the food production business because oil prices are significantly more volatile than agricultural commodities.
For example, from 1977 to 2008, the price volatility of crude oil was 2.6 times that of corn.
That means food producers are not only facing higher costs but much more volatile costs.
"Unless oil goes to below $US50 (per barrel) and stays there, which appears to be unlikely, this is going to be with us next year and beyond, and we have already seen an example of what that can do to a food production company," Mr Elam said.
He noted that today's food production system is not geared toward dealing with the recent commodity volatility on a long-term basis.
Bill Roenigk, economist with the National Chicken Council, said current corn and soybean prices are not at levels that will encourage farmers to plant the additional acres needed next spring.
"I think once the fundamentals kick in on corn and soybeans, those prices will go up to encourage farmers to plant the kinds of crops we need," Mr Roenigk said.
"Depending on how the crop gets planted in the spring and how it looks for the harvest in the fall, we'll begin to see food/feed costs either somewhat where they are now or going up."
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