General Mills expects food commodity prices to rise 5% a year

General Mills Inc. Chief Executive Officer Ken Powell said the Cheerios maker expects food commodity prices to continue rising about 5 percent annually as demand from emerging markets increases.

Commodity prices have gained about 5 percent to 6 percent a year for more than a decade, he said today at a press conference with joint venture partner Nestle SA in Orbe, Switzerland.

"If you average it out, it's about 5 percent, and so we think this is likely to continue," he told journalists, saying the company has an assumption of "mid-single digit" input cost inflation. "We were planning for this."

General Mills, based in Minneapolis, Minnesota, has been trying to offset higher input costs as much as possible by eliminating waste and improving productivity, Powell said. The company, which raised prices on about a quarter of its cereal products in November, aims to minimize price increases, he said.

"The consumer is still being pretty careful," Powell said. "Consumer confidence is rising, but slowly, and it's still pretty low."

Nestle, based in Vevey, Switzerland, and General Mills today inaugurated a cereal research center for their Cereal Partners Worldwide joint venture.