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High Commodity Costs See Kellogg Raise Prices

NEW YORK -- Kellogg Co. plans to raise prices on the majority of its cereal brands and Pop-Tarts toaster pastries effective this month because of high costs for commodities, such as food and oil, according to an Associated Press report.

The price increases, announced last year and in the low- to mid-single-digit percentages, will be effective Jan. 18, nationwide at all retail outlets, including discounters such as Walmart. They exclude All-Bran and Special K cereals, according to Kellogg spokeswoman Susanne Norwitz.

In a note to clients, Longbow Research analyst Alton Stump said rival cereal maker General Mills Inc. may follow suit if Kellogg's increases pass through with little difficulty.

High costs for key ingredients like corn and oil continue to hurt the profit margins of food makers, including Kellogg, the AP reported. Commodity costs have declined from highs reached in 2008, but remain above historical prices.

In October, Kellogg posted a third-quarter profit as higher prices helped offset the higher costs. At the time, the company said despite some recent moderation of commodity costs, it still expected the cost of goods sold to rise 5 percent in 2009.
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