Food prices have been rising, recently in the US at the fastest rate in 17 years. These prices are, perhaps not exactly at the highest level, nonetheless here to stay. Demand, supply, and structural reasons should keep food prices high. As globalization has increased wealth everywhere, people are buying more food to consume, improving their health. This demand, especially for beef and other high quality meats, is unlikely to decline and more likely to increase more.
Supply of food commodities is not increasing as rapidly as it might have for a variety of reasons. The US is sequestering a large portion of its corn--a fundamental feed grain--for subsidized ethanol production, removing it from the food/feed chain. The remaining corn supply is being bid by a larger pool of feed companies and so on. As farmers have planted acreage in corn, rather than wheat and fruit and vegetable crops, the supply of those crops has been inadequate to meet demand, thereby increasing prices. Finally, over the past several decades, subsidized US prices for wheat and corn have enabled US commodity exporters to obtain new markets abroad, forcing local producers out of business, even stimulating (by lower prices) shift in local diets from, e.g., rice to wheat. In Mexico, US corn and wheat are used to make tortillas. In Japan, cheap US feed grains have enabled Japan to increase beef production, spread the taste for beef and thereby compelling Japan to import beef. Japan is moving away from rice and fish to beef and breads. A year or two ago, as an indicator of this phenomenon, a team of Japanese bakers won the international bread baking contest (meaning wheat flour bread), beating French and American teams. China and India are joining in this shift of local diet and increasing their consumption of beef.
At the same time, according to the Wall Street Journal (Partrick Barta, "Higher Food Prices May Be Here to Stay", Wall Street Journal, Monday, April 14, 2008, A2), American farmers are reluctant to over-invest in production, out of fear that the debt required to make this investment would be imperiled by a sudden drop in prices. Even if a drop in prices over the long run is generally unlikely, it would only take a couple of growing seasons of low prices caused by governmental intervention around the world, to drive a farmer toward bankruptcy. For this reason, supply is unlikely to rise enough to meet demand.
Update. April 20, 2008. Here is a news video which covers the sensational aspects of the story of higher food prices.