UPDATE 1-U.S. food makers urge Obama to boost FDA spending

(Adds 2008 and 2009 figures in paragraph 3)

WASHINGTON, Jan 15 (Reuters) - President-elect Barack Obama and the new Congress should increase spending for food safety measures and cut subsidies to corn-based ethanol, the Grocery Manufacturers Association said on Thursday.

Consumers are concerned about food safety after several high-profile contamination scares and are worried about high food prices, said the group, which represents major food makers like General Mills GIS.N and ConAgra Foods CAG.N.

The group urged the Obama administration to boost food-related spending for the Food and Drug Administration to $900 million by fiscal 2012, up from $510 million in fiscal 2008 and an estimated $585 million for fiscal 2009.

“Although spending has increased in recent years, that spending has not kept pace with inflation,” said Scott Faber, the group’s vice president for federal affairs.

“As a result, we’ve been losing scientists and inspectors and have been unable to keep pace with the growing amount of (food) imports as well as changing consumer preferences,” Faber told reporters.

Congress should pass laws requiring companies selling food in the United States to have a food safety plan. The plan would help determine potential sources of contamination and set forth food safety controls, the association said.

The group supported giving the FDA mandatory recall authority and the power to regulate fruits and vegetables through new federal safety standards for certain products.

Food prices increased last year after prices for raw food commodities like corn reached historic highs.

The grocery makers want the Obama administration to increase research and development of “second-generation” cellulosic biofuels made from crop wastes and materials not used in the U.S. food supply.

“The packaged food industry, the feed industry and the ethanol industry are all victims of this high period of sustained commodity price inflation,” Faber said.

The GMA has blamed the U.S. ethanol industry, which this year will consume a third of the corn crop, for high corn and food prices.

Corn prices have since dropped by 50 percent.

“For those products where the price of corn is a significant factor in the price of the overall product, we’ve seen prices fall as the price of corn has fell,” Faber said of items like milk and eggs.

Prices for items like packaged food have not yet dropped because the corn used to make it was bought months ago, when prices were still high, he said.

The group wants the government to convert its $5 billion annual tax subsidy for refiners that blend corn-based ethanol into gasoline into a production tax credit for makers of cellulosic biofuels to speed up its development.

The group also gave recommendations for new dietary guidelines consistent with consumers’ everyday lives and for improvements in child nutrition through better school lunches and an expanded school breakfast program. (Reporting by Jasmin Melvin; Editing by Marguerita Choy)