High Commodity Prices Hurt Large Food Manufacturers' Bottom Line

Photo: Mykola Velychko / Istock

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Increased global demand for commodities like wheat coupled with bad weather, the weak dollar, and the rising costs for energy and agricultural products all seem to be taking their toll on corporate American’s bottom line.

Companies such as Campbell's and Kelloggs are reporting that higher energy costs and increased prices for raw materials "were hurting profits." Besides soups, The Campbell Company produces Pepperidge Farm brand breads, cookies and crackers.

But according to an article in The Philadelphia Inquirer, higher prices (with the exception of spiking gasoline and fuel prices) will not be felt by the consumer at the cash register. The softness in the U.S. economy due to other factors is forcing companies to hold back on increases that would affect your pocketbook.

Local bakers are experiencing sticker shock though as the cost of flour is more expensive than ever and those higher costs are trickling down to consumers -- bread prices have increased about 12% this year.

Wheat price declines are not on the menu in the near-term forecast but the U.S. Department of Agriculture expects grain prices to fall in 2008 as farmers step up wheat production to meet demand and, in turn, receive better prices for their crops. Maybe this will entice farmers to grow more wheat over corn.

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