Coffee ETN Buzzes as Smucker Cites Higher Prices

June 9th at 10:28am by Tom Lydon

An exchange traded note that follows coffee futures rose 1% on Thursday while JM Smucker (NYSE: SJM) said its quarterly profit weakened although it was able to pass some higher coffee costs along to consumers.

Smucker, which owns the Folgers and Dunkin’ Donuts brands, said costs were “significantly higher” for green coffee in the fourth quarter.

“As expected, price increases taken throughout the year to offset higher commodity costs were realized and contributed to incremental gross profit, but did not generate margin expansion,” the company said in the earnings release.

Smucker said its U.S. retail coffee business saw net sales rise 21% in the fourth quarter “primarily reflecting the impact of three price increases taken during 2011 totaling 23%.”

The company’s recent price increase was its fourth and biggest hike in a year. [Coffee ETN Falls After Smucker Price Hike]

Smucker recently acquired Rowland Coffee Roasters brands.

“As with the rest of the industry, questions are likely to focus around input costs, elasticity, and competitive dynamics, especially in the key coffee category,” Deutsche Bank analysts wrote in a Smucker earnings preview.

They noted the company in late May announced an 11% increase on the majority of its coffee products on top of three other price increases within the past year. The analysts said they expect Smucker’s gross margins to decrease significantly on higher raw material costs for green coffee, milk, sugar and soybean oil.

The iPath Dow Jones-UBS Coffee ETN (NYSEArca: JO) rose 1%.

Also Thursday, Coffee Holding (NasdaqCM: JVA) shares vaulted over 20% after the company reported quarterly results.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers