UPDATE 3-Smucker hikes Folgers coffee 11 pct in fourth rise

* Smucker raises list prices by 11 pct

* Arabica coffee futures touched 34-year highs early May

* Coffee demand seen rising despite elevated costs
(Adds bylines, datelines, recasts throughout, adds background,
graphics; updates share price.)

By Marcy Nicholson and Mihir Dalal

NEW YORK/BANGALORE, May 24 (Reuters) - Top U.S. packaged
coffee maker J M Smucker Co (SJM.N) raised prices for key
brands including flagship Folgers by an average of 11 percent
on Tuesday, its fourth and biggest hike in a year.

The increase comes even after benchmark coffee futures
slipped back from a 34-year high, as roasters are still
absorbing the steep costs of beans bought during the long
rally. Smucker has raised prices by a total 38 percent since
last May, while arabica futures in New York have doubled.

Smucker, which licenses the Dunkin' Donuts brand and also
sells Millstone, has not moved as intensely as chief rival
Kraft Foods (KFT.N), which has raised prices by roughly 56
percent since May 2010, with its last increase to Maxwell House
up a large 22 percent on March 17. [ID:nN17221437]

Rising retail prices are often taken as a bullish signal by
coffee traders who reckon that roasters will be more prepared
to pay up for physical beans. But with with U.S. shoppers
facing high fuel costs and food prices, some have begun asking
at what price consumers might begin to cut back.

Until now, there have been no obvious signs that demand for
coffee in the United States has been dampened by the price
increases. And many analysts say rapid new demand from emerging
markets like China and India will compensate for flattening
growth in mature markets. [ID:nLDE74F192]

The issue is a pressing one for traders considering whether
the 12 percent fall in prices this month is a temporary
correction or the end of a nearly year-long rally.

Arabica coffee futures KCc2 touched 34-year highs at
$3.0890 per lb earlier this month, more than doubling over the
past 11 months, on speculative buying and tight supplies of
high-quality arabica beans. Until this month, coffee had been
the best-performing commodity this year.

The rising costs have led companies across the board like
Starbucks (SBUX.O), Green Mountain Coffee (GMCR.O) and Nestle's
(NESN.VX) premium portioned coffee brand Nespresso, to pass on
the costs to shoppers.

A Kraft spokeswoman said the company did not have anything
to announce on Tuesday.
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Graphic on coffee prices: link.reuters.com/zab79r

Graphic on consumption: r.reuters.com/fex69r

Graphic on 2011 performance: r.reuters.com/duj88r

FACTBOX-History of coffee price moves [ID:nN24365295]
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Arabica coffee is typically roasted and used in brewed
coffee whereas robusta beans are much cheaper and are typically
processed into instant coffee or used as a minor component in
roasted blends as a lower-cost alternative.

Robusta futures on Liffe LRCc2 climbed about 95 percent
in the rally that began in June 2010, reaching a three-year
peak at $2,672 per tonne in March.

The premium of arabica over robusta hit a record high this
month at $1.89 per lb, with coffee traders and importers saying
some roasters are offsetting rising costs by increasing the
amount of robusta and lower costing arabica beans that they put
in their blends. Kraft and Smucker declined to comment on
purchasing details. [ID:nSGE749008]

The International Coffee Organization estimates that global
coffee demand will hold firm helped by faster-paced lifestyles
in China and other Asian economies, despite higher prices.

Shares of the Orrville, Ohio-based Smucker were up 0.8
percent at $77.52 by 11:42 a.m. EDT (1542 GMT) on the New York
Stock Exchange.

(Reporting by Mihir Dalal in Bangalore and Marcy Nicholson
in New York; Editing by Maju Samuel and Jonathan Leff)