General Mills (GIS)

The principal raw materials that we use are grains (wheat, oats, and corn), sugar, dairy products, vegetables, fruits, meats, vegetable oils, and other agricultural products. We also use substantial quantities of carton board, corrugated and plastic packaging materials, operating supplies, and energy. Most of these inputs for our domestic and Canadian operations are purchased from suppliers in the United States. In our international operations, inputs that are not locally available in adequate supply may be imported from other countries. The cost of these inputs may fluctuate widely due to government policy and regulation, weather conditions, or other unforeseen circumstances. We have some long-term fixed price contracts, but the majority of our inputs are purchased on the open market. We believe that we will be able to obtain an adequate supply of needed inputs. Occasionally and where possible, we make advance purchases of items significant to our business in order to ensure continuity of operations. Our objective is to procure materials meeting both our quality standards and our production needs at price levels that allow a targeted profit margin. Since these inputs generally represent the largest variable cost in manufacturing our products, to the extent possible, we often hedge the risk associated with adverse price movements for some inputs using a variety of risk management strategies. We also have a grain merchandising operation that provides us efficient access to, and more informed knowledge of, various commodity markets, principally wheat and oats. This operation holds physical inventories that are carried at fair market value and uses derivatives to hedge its net inventory position and minimize its market exposures.

 

The principal raw materials that we use are grains (wheat, oats,
and corn), sugar, dairy products, vegetables, fruits, meats,
vegetable oils, and other agricultural products. We also use
substantial quantities of carton board, corrugated and plastic
packaging materials, operating supplies, and energy. Most of
these inputs for our domestic and Canadian operations are
purchased from suppliers in the United States. In our
international operations, inputs that are not locally available
in adequate supply may be imported from other countries. The
cost of these inputs may fluctuate widely due to government
policy and regulation, weather conditions, or other unforeseen
circumstances. We have some long-term fixed price contracts, but
the majority of our inputs are purchased on the open market. We
believe that we will be able to obtain an adequate supply of
needed inputs. Occasionally and where possible, we make advance
purchases of items significant to our business in order to
ensure continuity of operations. Our objective is to procure
materials meeting both our quality standards and our production
needs at price levels that allow a targeted profit margin. Since
these inputs generally represent the largest variable cost in
manufacturing our products, to the extent possible, we often
hedge the risk associated with adverse price movements for some
inputs using a variety of risk management strategies. We also
have a grain merchandising operation that provides us efficient
access to, and more informed knowledge of, various commodity
markets, principally wheat and oats. This operation holds
physical inventories that are carried at fair market value and
uses derivatives to hedge its net inventory position and
minimize its market exposures.