I first heard this thesis from C. Warren Hunt in the early 90s.
There was a sort of a flurry of items on this and similar topics on FR a few months ago and naturally enough those aren't turning up easily right now, I'll get back to this if I can find a few of them.
The basic principles of supply and demand are in part to blame: If demand for a good remains the same (or increases), and supply is reduced, prices will rise. In addition to being a staple for humans, corn is a chief component of livestock feed. So we can expect these higher corn prices to push grocery prices higher.
Why not use sugar beets as the main source of ethanol rather than using corn. It will help lower down the prices of goods that uses corn.