Coffee may rise 40pc****

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LONDON, Apr 29 (Bloomberg): Brazil, the world's biggest coffee grower, is facing the risk of frost after hail this month, raising the prospect of a 40 per cent jump in bean costs after Kraft Foods Inc and JM Smucker Company already increased prices. The chance of frost in Brazil increased with the weakening of La Nina, a cooling of waters in the Pacific Ocean, Brazil's Somar Meteorologia said this week. Frost in 1994 damaged 35 per cent of the crop by 1997, sending prices up 39 per cent that year, according to Somar. Should cold weather damage trees this year, coffee may rise to a record $4.20 a pound, the median in a Bloomberg survey of 11 analysts, traders and investors. Arabica beans have already jumped 24 per cent this year on signs demand is outpacing supply. The shortage will be 6.2 million bags in the crop year starting in October, according to Rabobank International. Kraft, maker of Maxwell House coffee, raised prices three times last year. It estimated in February that North American commodity costs would increase $700 million to $800 million this year, or about 1.5 per cent of 2010 revenue. "There is no room for disruption," said Rodrigo Costa, vice-president of institutional sales at Newedge USA LLC in New York, who correctly forecast a year ago that coffee would climb. "If Brazil has a frost, not only will we see uncharted prices but the situation might become unbearable."