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Hot Trade, Coffee

If you’re a coffee drinker you might have to dig a little deeper into your wallet to pay for that next bag of beans.

The price of coffee futures hit a seven month high this month, driven by weather problems, high labor costs, the price of fertilizer and strong demand.

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 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 and Starbucks 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