Starbucks Corp, the world's largest coffee chain, expects rising coffee prices to hit profits more than it previously thought and forecast full-year earnings below analysts' expectations.

That news sent its shares down more than 2 percent, even as the company reported profits and U.S. sales that handily topped Wall Street's targets.

Rising prices for restaurant food ranging from coffee and milk to beef and bread are pressuring restaurant operators.

Earlier this week Starbucks rival McDonald's Corp said it would raise prices "where it makes sense" to offset some, but not all, of the food cost increases.

Seattle-based Starbucks on Wednesday narrowed its earnings forecast to $1.44 to $1.47 a share for fiscal year 2011, compared with the average analyst expectation of $1.49 a share. The company expects commodity costs to cut earnings by about 20 cents this fiscal year, compared with its previous forecast of 8 cents to 10 cents a share in November.

Coffee represents 15 percent to 20 percent of Starbucks cost of sales, including occupancy.

The benchmark "C" arabica coffee futures contract trading on ICE Futures U.S. remains around levels last seen 13-1/2-years ago, after surging nearly 80 percent in a rally that began in June 2010.

Late last year the company raised drink prices in the United States and China due to surging prices for coffee and other commodities.

Chief Financial Officer Troy Alstead told Reuters that the company is "fully locked" for fiscal 2011 -- meaning it has bought all the coffee it will need for this year.

"I don't think you'll see what I'll call a new round" of price increases, said Alstead, who noted that the previously announced round of menu price hikes due to the cost of coffee has not yet shown up in every market.

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