SOURCE: The Bedford Report

The Bedford Report

November 25, 2010 08:46 ET

Surging Crop Prices Cause Cereal Manufacturers to Invoke Risky Strategies

The Bedford Report Provides Analyst Research on Sara Lee & Kellogg

NEW YORK, NY--(Marketwire - November 25, 2010) - The prices of corn, wheat and other commodities have surged this year in part due to a decline in US and Russian production prospects. While crop prices had a bit of pull back in early November due to Chinese demand concerns, the cold winter expected from "La Nina" has fuelled speculation that even southern hemisphere crops may struggle, and once again send prices higher. The spike in crop prices has increased costs in the processed & packaged goods industry, and caused many notable companies to raise prices on some of their products. The Bedford Report examines the outlook for companies in the Processed & Packaged Goods Industry and provides research reports on Sara Lee Corporation (NYSE: SLE) and Kellogg Company (NYSE: K). Access to the full company reports can be found at:

In an effort to offset surging corn and wheat costs, General Mills said this month that it would increase prices on about one-quarter of its merchandise, in particular its cereal and baking products. Ian Friendly, chief operating officer of General Mills' U.S. retail business, conceded at a conference last week that "As input cost pressures are materializing across the industry, we expect moderation in the promotional environment."

The Bedford Report releases regular market updates on the processed & packaged goods industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at and get exclusive access to our numerous analyst reports and industry newsletters.

Ian Friendly believes inflation in input costs is an "undeniable fact" and expects other manufacturers to follow General Mills' lead and raise prices on cereal. Cereal juggernaut Kellogg hinted earlier this month that it could raise prices.

Raising prices is a risky maneuver, and a difficult choice for manufacturers to make, as this strategy could scare customers from the more expensive products. A recent report from The Wall Street Journal argued that employment concerns could cause many Americans to merely trade down on brands.

Pressured by diminishing margins in certain parts of its extensive product lineup, Sara Lee Corporation recently divested itself of its North American bakery unit, in order to concentrate on the more profitable meats and coffee lineups. According to Interim CEO Marcel Splits, on the company's recent Earnings Call, "these are categories where we hold real competitive sustainable advantage." The proceeds of the sale will primarily be used by the company to finance its share buyback program.

The Bedford Report provides Analyst Research focused on equities that offer growth opportunities, value, and strong potential return. We strive to provide the most up-to-date market activities. We constantly create research reports and newsletters for our members. The Bedford Report has not been compensated by any of the above mentioned publicly traded companies. The Bedford Report is compensated by other third party organizations for advertising services. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at

Contact Information