Ferguson: Liverpool are United's rivals, not City
Ferguson stuck the boot in first by saying Liverpool would always be United's biggest rivals rather than City, prompting Hughes to declare that the Premier League champions were losing their touch.
Expectations are high at big-spending City and their unbeaten start to the league season has convinced some that they can challenge the domination of the big four of United, Chelsea, Arsenal and Liverpool.
"Liverpool, to me, will always be the derby game. It's because of the history," Ferguson told reporters.
"When I came down here they were the kingpins of England they'd won four European Cups at the time, quite a few league titles. It's hard to go against history."
Hughes responded to what City fans would see as a slight by suggesting that United have suffered this season because they have not replaced Cristiano Ronaldo or Carlos Tevez.
"You cannot afford to lose players of that standard and not replace them," he told reporters.
"They have not replaced them. At the end of the day I have watched a number of their games and I don't think they are playing as well as they did last year. They played well against Tottenham, that has been their standout performance but prior to that they have been below par."
Ferguson said he expected a "feisty" clash on Sunday.
"I've been asked the question of whether this is the biggest derby game of all time? It's difficult to say. If you go back to the 60s City won the league and we won the European Cup so it must have been an incredible time for Manchester," he said.
"But in recent years they (City) have not achieved that. Now they have bought the players and there is expectation. It's far better than we've had for a long time. It will be a real feisty game, there's no doubt about that and I look forward to it."
Hughes said the fact Ferguson was even talking about City was gratifying.
"We take it as a bit of flattery," said Hughes, whose side have won their first four matches.
"For a number of years City have never affected the thinking of Manchester United and possibly that has changed now."
Argentine striker Tevez could feature against the side he left in the close season if he shakes off a knee problem but Ferguson could be without defender Rio Ferdinand due to a groin problem.
"It doesn't bother me one bit," Ferguson said of Tevez's possible return. "I think their best player is not playing. Adebayor has been their star player, he's scored in every game and he will be a loss really."
Adebayor starts a three-match ban imposed for violent conduct. The Togo international accepted the charge for a malicious stamp on Arsenal's Dutch striker Robin van Persie during City's 4-2 home win last Saturday.
He was also charged with improper conduct for running the length of the pitch to goad fans of his former club, a charge Hughes said City would appeal against.