Brasil Foods wants to up prices to offset commodity cost pressure

Brasil Foods wants to up prices to offset commodity cost pressure

Brazilian food group Brasil Foods has said it will look to increase prices to offset the recent spike in commodity costs.

The company yesterday (14 August) reported a slump in half-year profits that was partly thanks to a spike in grain prices.

Brasil Foods also noted its margins in export markets were "narrowed" due to an over-supply of products in countries like Japan and the Middle East.

Speaking to analysts after the results were announced, Brasil Foods said it intended to push up prices to tackle the pressure it was seeing on commodity costs.

"The US crop changed the whole scenario in 15 days after the report from the USDA. We will need to transfer prices. There is going to be some important movement," Brasil Foods said.

However, Brasil Foods cautioned that it would be difficult to increase prices in some markets. In Europe, for instance, it would look to "adjust" production to offset the commodity pressure.

"Some markets will allow [price increases], others won't," the company said. "Japan will not allow such an improvement. Europe won't either. We will have to adjust local production. Wheat in Europe is at US$9 a bushel and is more expensive than corn."

Food manufacturers are growing concerned at the impact extreme weather in the US and in parts of Europe could have on commodity costs. The worst drought in 50 years in the US has hit corn and soybean yields and pushed up prices.

Brasil Foods said it was a "matter of worldwide importance". It insisted: "These adjustments should happen all over the world with all the players we have in the market."

The company said it expected to record a "better performance" internationally in the second half of 2012 but it remained cautious about the impact price increases could have on demand.

"We should be cautious because we do need to transfer prices above what we had expected," it added.