Blog: Dean BestWhy soaring grain costs are helping General Mills

Dean Best | 19 March 2008

General Mills boss Ken Powell has every right to be upbeat today (19 March).

Powell, CEO of the US food giant, described the company’s third-quarter results as “terrific” – profits jumped 43%, with sales up 11.5%.

The company looks to be managing the rise in commodity costs better than some of its peers and its results beat Wall Street estimates.

However, a little-known fact is that, alongside such kitchen cabinet staples like Cheerios cereals, Nature Valley snacks and Pillsbury bread, General Mills also buys grain to sell to the rest of the industry.

With grain prices soaring, this part of the business has had a buoyant third-quarter.

"Grain inventories are usually immaterial, but with the recent run-up it's become material," Powell said on a conference call with analysts.

"We purchase more wheat and oats than we use. We have some excess inventory that we can sell into the market."


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