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UPDATE 1-J.M. Smucker sales forecast tops estimates

(Adds details from conference call, forecast, background, share move)

June 5 (Reuters) - J.M. Smucker Co forecast full-year earnings largely above estimates and reported a better-than-expected quarterly profit as costs fell and sales increased in its domestic food business, which makes Jif peanut butter and Crisco oils.

The Folgers coffee maker's shares rose 2 percent.

Smucker forecast adjusted earnings of $5.95-$6.05 per share on net sales growth of about 5 percent for the year ending April 2015. This implies revenue of about $5.89 billion.

Analysts on an average were expecting earnings of $5.98 on revenue of $5.77 billion, according to Thomson Reuters I/B/E/S.

Smucker said it was no longer at a cost disadvantage and expects its peanut-butter business to be the "key contributor" to its consumer foods segment profit in 2015.

The company, which competes with Hormel Foods Corp that owns the Skippy peanut butter brand, realized lower peanut costs during the quarter, an executive said.

Smucker has been struggling to boost sales of its peanut butter and fruit spreads as competition increases and consumers shift away from artificially sweetened fruit spreads.

The company, on Tuesday, raised list prices on most of its U.S. packaged coffee for the first time since 2011 as arabica coffee futures prices jumped nearly 90 percent within three months to a 26-month high in April.

Ohio-based Smucker expects K-cups to achieve modest volume growth in 2015, but warned that margins would fall below the overall segment average, a company executive said on a conference call with analysts.

K-cups, which are coffee pods used with Keurig Green Mountain Inc's single coffee brewers, have been hugely successful for Smucker since the companies partnered in 2010.

Net income fell 9 percent to $118.5 million, or $1.16 per share, in the fourth quarter ended April 30 from $130.3 million, or $1.22 per share, a year earlier.

Excluding items, the company earned $1.21 per share.

Net sales fell 8 percent to $1.23 billion, hurt by a 12 percent drop in sales in its U.S. retail coffee business as it cut prices to pass on lower green coffee costs realized during the year.

The company sells Folgers and Dunkin Donuts packaged coffee in its retail coffee business. Sales volumes for both brands rose 1 percent in the quarter, the company said.

Analysts on average had expected Smucker to earn $1.16 per share on sales of $1.24 billion.

Smucker shares were up 2 percent at $104.90 on the New York Stock Exchange on Thursday.

(Reporting by Siddharth Cavale and Devika Krishna Kumar in Bangalore; Editing by Joyjeet Das)