Food Producers Lock in Profits

Falling commodity prices are already helping some food producers boost profits. On Wednesday, both Kraft and Kellogg posted quarterly profits that were better than Wall Street analysts expected.

Both companies said they were able to pass "higher costs" along to consumers in the form of higher prices. What they didn't say (except between the lines) was that their costs have fallen, but their prices haven't. And they probably won't any time soon. Commodity prices have fallen by about half since their summer peaks.

Kraft was also helped by the major restructuring and cost-cutting that are part of its three-year turnaround plan and by its $2.6 billion sale of the Post cereals business to Ralcorp Holdings. Kraft's profits more than doubled in the quarter.

The Wall Street Journal reported that "Kraft says demand for its food products is holding up despite the weak economy." But that sentence would more accurately read "... because of the weak economy." The worry had been that consumers would choose store brands rather than Kraft's pricier items. And to some degree, they have. But with more people opting to eat at home more often, it seems that all grocery brands are being lifted.