Higher prices for wheat and milk have taken a toll on profits at Kraft Foods Inc., the world's second-largest food company. The company reported yesterday that profits declined by 20 percent in the third quarter of the year. Despite that decline in profits, the company still beat market expectations for the quarter.

According to an article at Bloomberg.com, wheat prices have climbed 82 percent, and dairy prices have climbed 40 percent in the third quarter. Drought in Canada and Australia, combined with more than enough rain in the United States, France and Germany has diminished the world supply of wheat. And the price of skim-milk powder has more than doubled during the past year. The price increase is in part from growing world demand.

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