FOOD AND consumer goods companies are overhauling the way they buy and hedge commodities after being caught out by increases in the prices of raw materials that have squeezed industry margins and cut profits.

Companies are turning to commodity trading houses for the first time to hire traders to help them cope with global inflation.

Such decisions suggest executives have realised that volatile commodity markets are not a short-term phenomenon but a structural change driven by rising demand from emerging markets.

Peter Evans, co-ordinator of the European consumer products practice at headhunter Russell Reynolds Associates, said companies were approaching trading houses such as Cargill, Bunge and ADM to find traders who understood volatile markets.

"If they can buy commodities more intelligently than their competitors, that can be an advantage," he said, adding that the firm had been hired to fill a new role of global commodities procurement director at a leading food group.

Prices of some commodities, such as corn and wheat, are now fluctuating as much in a single day as they did in a year in the early 1990s. Brice Russell, chief procurement officer for food group Mars, said companies were poaching people from each other as well as from commodity trading houses. - ( Financial Times service)