General Mills CEO says hurt by volatile commodity markets

DAVOS, Switzerland (Reuters) - General Mills (GIS.N) Chief Executive Ken Powell said on Friday volatility in commodity markets was hard to manage as the food company tries to keep a lid on prices, but hedging helped manage budgets.

"It is very much in our interest to keep prices down and this makes life difficult," Powell told Reuters Insider.

Powell said the firm had seen input inflation of about 30 percent over the last five to six years, but had managed to keep price increases to around 10-12 percent, with hedging on commodity markets helping to manage costs.

"It's a very good tool for us to be able to engage in derivatives trading," he said. "We're not speculating in the markets, we're very much managing our budget cycle."

The company posted earnings and sales in December that missed Wall Street estimates, hurt by higher commodity costs and spending on promotions. It said it is on track to cut $1 billion in costs by the end of May 2012, which should help offset rising commodity costs.

General Mills, which sells Green Giant vegetables and Progresso soup, is part of a U.S. packaged food industry that has been squeezed in recent months by rising prices for ingredients like wheat and cocoa, and concerns that recession-weary consumers will resist the price increases needed to help cover those costs.

(Reporting by Emma Thomasson; editing by Michael Stott)