NEW YORK (MarketWatch) -- Archer Daniels Midland Corp. on Tuesday countered criticism that biofuel production is driving up food prices and defended the industry as the answer to meeting the world's rising energy demand.

The Decatur, Ill.-based agriculture company is the country's largest ethanol producer, spending millions of dollars on production facilities. At the same time, the industry benefited from about $3.2 billion in federal tax breaks last year, the biggest energy-related tax break ever, according to an April report from the Energy Information Administration.

Biofuel is made from the same grains that people eat and feed to their livestock. With the price of grain sharply higher this year, many are now questioning whether subsidizing the ethanol industry is really in the country's best interest.

“ 'Retreat from biofuels is just an empty gesture. That won't fill anybody's stomach and won't fill anybody's gas tanks.' ” — Patricia Woertz, Archer Daniels

But food costs are being driven primarily by higher energy costs, said Archer Daniels ADM, -1.11% Chairman and Chief Executive Patricia Woertz, which is the result of a tight energy supply -- not increased biofuel production.

"And I actually find it sad, and maybe even a little ironic, that these misguided attacks on biofuels is directed at the one alternative we actually have today for...increasing the fuel supply," she said, speaking on a post-earnings conference call.

Further, a pullback of U.S. government subsidies to the industry would be "wrong, it's foolish, I think it's dangerous, I think it's a mistake," Woertz said.

"Retreat from biofuels is just an empty gesture," she said. "That won't fill anybody's stomach and won't fill anybody's gas tanks."

The nascent biofuel industry has spent millions lobbying for greater U.S. support, culminating in President George W. Bush's declaration in his 2006 State of the Union Address that biofuel will be an important step towards achieving national energy independence.

Archer Daniels Midland contributed more than $700,000 toward lobbying the federal government in 2007, according to filings provided through the Lobbying Disclosure Act.