Krishna says in the Bhagavad-gita that He will accept a flower, water or a leaf. Where in scripture does it say that milk, sugar, and grains are also ok?
When Krishna says offer me with love and devotion a leaf, a flower, fruit, and water; this includes all offerings coming from plants. Basically, grains are considered the flower and/or the fruit of that plant. Sugar is distilled from the stalk of the sugar cane plant.
There are many places in the Srimad-Bhagavatam, especially in the chapters describing Krishna's childhood pastimes, the chapter on Govardhana-puja, and the wives of the brahmanas satisfying Krishna and his friends, which offer vivid descriptions of milk and milk products being prepared by devotees, and offered to the Lord. He loves cows, He regularly drinks milk, and eats butter and yogurt.
Also in the Chaitanya Charitamrita, Madhya lila chapter 3, there are lists of many preparations prepared by devotees, with various ingredients that were offered to the Lord.
Basically the understanding is that animals and their embryos shouldn't be sacrificed for the palate of man. Krishna doesn't accept the offerings that come from such violence.