Released: August 11, 2008

Food giants pass rising costs to consumers

Source: Scott Kilman, Wall Street Journal [Baltimore Sun] (Free Registration)

Companies throughout the food chain are changing the way they do business in response to soaring grain costs, and consumers are likely to bear the brunt in the form of rising food prices.

Farmers are making the broadest cuts to their livestock herds in decades, meaning meat at the supermarket will likely cost more in coming years. Middlemen are trying to shorten the duration of supply contracts to 90 days from one year so they can pass on higher costs more quickly. And food brands are shrinking the contents of their packages, from ice-cream cartons to beverage containers.

“Everyone’s adjusting,” Brenda C. Barnes, chief executive of Sara Lee Corp., said last week after the company reported a $695 million loss for the quarter ended June 28. That included an $850 million after-tax charge, mostly for writing down the value of bakery businesses hit by soaring wheat costs.

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