The link between ethanol production, higher corn prices and an increase in the cost of meat isn't yet clear, said a spokesman for the Indiana Beef Cattlemen's Association, but the Department of Agriculture doesn't completely agree.

Corn prices, which the U.S. Department of Agriculture says could average a record $3.60 a bushel this year, could climb even higher as more ethanol plants go online, said the association's Joe Moore. Currently, the state has about a half dozen operating ethanol plants, and the number is expected to jump to 13 by the end of the year, he said.

Ethanol is being produced to supplement the petroleum supply and lower fuel costs. The Department of Agriculture estimates 27 percent of the 2007 corn crop, or 3.4 billion bushels, will be converted into ethanol.

"But we just don't know the impact of the corn supply going to ethanol yet," he said. "It depends of whether distillers grains (byproduct of ethanol production) can be used for cattle feed. We just don't know."

Tom Rose, director of specialty meats division of the Lansing-based lunchmeat producer Land O Frost, said "seasonality" currently is in play, so "it's hard to say" higher meat prices are the result of increased grain prices.

"It (the seasonal increase) masks the impact and makes it hard to pinpoint what's driving a particular fluctuation," Rose said. "This is typically an up quarter."

The diversion of corn from feed to fuel and the reverberations it will have on the livestock sector are being studied by the U.S. Department of Agriculture's Economic Research Service.

It concludes that "higher prices for corn affect the livestock sector because of the importance of corn as an animal feed." However, there is a partial offset to higher feed costs for livestock producers because distillers grains, a co-product of dry mill ethanol production, can replace some corn and soybean meal in animal rations.

"Nevertheless, as feed costs rise, red meat production declines and poultry production slows over the next several years," a report by the Economic Research Service said.

It projects the effect on consumers will be increased retail food prices.

"Lower livestock production means consumers will see higher prices for red meats, poultry, and eggs," the report said. "As a result, overall retail prices for food rise faster than the general inflation rate over the next several years."