Tags: General | Mills | Corn | prices

General Mills Sees Stable Prices Despite Corn Spike

Tuesday, 10 Jul 2012 11:43 AM

International food giant General Mills Inc. expects its prices to remain stable and stood by its forecast for cost inflation of 2 to 3 percent this fiscal year, despite a recent spike in corn costs.

"Consumers should see generally stable prices," General Mills Chief Executive Ken Powell said in an interview on Tuesday. He added that the operating environment should improve as the year progresses, as easing commodity inflation lessens the need for price increases that often hurt sales.

Corn prices have soared in recent days as weeks of sustained hot, dry weather across much of the United States has stoked fears of decimated yields in the Midwest crop belt. Yet U.S. corn and soybean futures fell on Tuesday due to a round of profit-taking and forecasts for rain.

But commodity costs overall are rising at much lower rates than last year.

General Mills, maker of Cheerios cereal and Progresso soups, expects its costs to be up 2 to 3 percent this year. That compares with an increase of more than 10 percent last year.

The company is about 50 percent hedged on commodity costs for the fiscal year, Chief Financial Officer Don Mulligan said.

The company is not a big user of corn, Powell said, noting that grains overall only comprise about 5 to 10 percent of the company's commodity basket.

GROWTH ABROAD

The company is focused on growing its business in overseas markets, particularly in emerging markets like Brazil, India and China.

Following the integration of Brazilian food company Yoki Alimentos, which General Mills expects to acquire during the first half of this fiscal year, General Mills will set its sights on India, Powell said.

China is also a key market for General Mills, which operates about 200 high-end Haagen-Dazs cafes in 45 Chinese cities. The company is opening more stores in more cities, and trying to boost sales of its ice-cream Mooncakes, said Gary Chu, president of General Mills' business in Greater China.

General Mills shares were up 7 cents, or 0.2 percent, at $38.53 on the New York Stock Exchange.

© 2017 Thomson/Reuters. All rights reserved.

   
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Tuesday, 10 Jul 2012 11:43 AM
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