September 7, 2010

Commodity prices to increase Brasil Foods' operating costs

Brasil Foods (BRF) expects costs to increase by 5-7% by the end of the year, due to higher commodity prices, according to CEO José Antônio Fay.

Increasing wheat prices in Europe are likely to boost other commodity prices, such as corn, hitting the production of animal protein in Brazil, he said. Higher cost, though, should not pass along to products, as grains come from a period of lower prices.

BRF costs with grains this year are estimated at BRL4-5 billion (US$2.3-2.9 billion). The executive said that he expects an important growth in domestic sales in the second half due to Christmas-related food. "Our domestic business will advance more than in overseas operations," he said, adding that the sluggish economic rebound in Europe have hit sales.

Of total BRF foreign sales, European countries account for 21%. "It is an important market, but there are no expectations for growth. Therefore, we are now focusing on the domestic, Asian and African markets, either though exports or acquisitions." Currently, the food company's main market is the Middle East, comprising 29% of total exports in the first half.