Commodity Easing Could Pare Coffee Costs At Starbucks, Kraft (JO, JJG, GMCR, KFT, SJM, SBUX, CBOU)

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After a lackluster start to 2010, the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (JO) surged higher in June, and is now up by 30% year-to-date, and as of this writing, the ETF’s three-month rally is second only to the iPath Dow Jones-AIG Grains Total Return Sub-Index ETN (JJG) among components of the Commodity ETFs Index. However, Bloomberg notes the bull run in coffee bean futures could be nearing its conclusion as hedge funds pare their bets.

Last week, Green Mountain Coffee Roasters (GMCR) announced that it would hike its K-Cup prices by 10% to 15% to account for input costs, most notably the recent surge in coffee beans. According to Bloomberg, packaged foods giant Kraft Foods (KFT) has increased the U.S. prices of certain Maxwell House and Yuban coffees twice since May, Folgers parent JM Smucker (SJM) boosted its coffee prices by an average 9%, and coffeehouse giant Starbucks (SBUX) announced that the rising commodity value will contribute 4 cents in expenses for the year ending September 2011.

As a whole, the Coffee Stocks Index has outperformed the S&P 500 by 3% over the last month, during which Green Mountain and Starbucks were top performers, gaining more than 7%. On a three-month basis, however, Green Mountain and small-cap coffeehouse operator Caribou Coffee Company (CBOU), which also offers coffee in K-Cups compatible with Green Mountain’s Keurig roasters, are the Index’s only winners.

Bloomberg cites ABN Amro Bank NV and VM Group, noting that supplies of the world’s most common coffee bean variety will exceed demand by 6.67 million 60-kilogram bags in the year ending September 2011, and speculators have begun paring their exposure to the commodity.

It will be interesting see where coffee prices and the related equity segments to from here. Investors can track the Coffee Stocks Index for performance trends and a suite of other metrics at tickerspy.com.

Tags: CBOU, GMCR, JJG, JO, KFT, SBUX, SJM