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The price of coffee futures [US@KC.1
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] hit a seven month high this month, driven by weather problems, high labor costs, the price of fertilizer and strong demand.
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According to the International Coffee Organization, or ICO a shortfall of around 2.5 million bags of Colombian milds pushed prices of that bean up in April -- to their highest monthly average since February 1998.
And those costs typically get passed along.
Maxwell House coffee brand owner Kraft [KFT
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] increased the price of its Colombian blend by almost 19% last month and Jose Sette, head of operations at the International Coffee Organisation (ICO), said it is possible others will follow suit.
"There comes a point when they can no longer keep delaying," he said. "It is hard to know when the other roasters will take their pricing decisions."
What’s the trade?
McDonald’s [MCD
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] and Starbucks [SBUX
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] both rely on coffee, explains Pete Najarian. But the price increases probably impact the firms very differently.
I can’t help but worry how Starbucks will manage the price increases, he says. McDonald’s however uses coffee as a loss leader – to get people in the door. It probably won’t have much impact there.
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Trader disclosure: On May 20th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (AGU), (F), (SKF), (SDS); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (ABT), (TER), (JOYG), (XBI), (X), (HES); Terranova Owns Oil Futures;p Terranova Owns Nat Gas Futures; Terranova Owns (DIS) Calls; Terranova Owns (XOM) Calls; Terranova Owns June Gold Futures; Najarian Owns (ISIS); Najarian Owns (APC) Call Spread; Najarian Owns (BBY) Put Spread; Najarian Owns (BX) Calls; Najarian Owns (INTC) Calls; Najarian Owns (MOS) Call Spread; Najarian OWns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Call Spread; Najarian Owns (PCU) Calls
Data is a real-time snapshot *Data is delayed at least 15 minutes
