Rising ethanol production has driven corn prices to record levels despite two good harvests, raising fears that the fuel additive would squeeze out the availability of grain for animal feeds.

Dick Bond, Tyson's president and chief executive, called on Washington to recognise the competing claims when drawing up a proposed new farm bill next year, amid support on both sides of Congress for ethanol production to rise as part of a renewable fuels strategy.

"I believe that the American consumer is going to have to pay more for protein," Mr Bond told analysts as the company reported a full-year lossas rising costs combined with sluggish sales.

"The consumer is ultimately going to have to pay for the higher grain costs," said Mr Bond. "The farm bill is the key in 2007. [The food industry] needs to make sure our legislators know what effect this is having on food-versus-fuel."

Mr Bond's remarks are the clearest statement to date of the unease felt among food producers about rising grain prices, and could prompt a clash over the competing interests of the energy and food sectors.

Leading ethanol producers such as Archer Daniels Midland, the US market leader which is also a big producer of animal feed, insist there is no competition. Pat Woertz, ADM's chairman and chief executive, last week said that a combination of market forces and new technology would provide supplies for both sectors. Ms Woertz told reporters that rising corn prices would prompt farmers to plant more corn, while biotechnology was improving crop yields.

Source: news.moneycentral.msn.com