March 12, 2012 at 3:38 PM ET
The price of coffee futures fell to a 17-month low on Monday, extending a prolonged downward trend after marking its weakest week in nearly six months.
The price of Arabica coffee, the bean sought after by gourmet and specialty coffee makers, is now down around 40 percent from peaks hit in May 2011 as concerns about a tight global supply have eased.
Does this mean you’ll see a drop in the price of your morning cup of Joe? It depends how well coffee companies have traded the commodity, said James Cordier, chief trader of commodity brokerage Optionsellers.com in Florida.
Coffee companies can hedge against a rising coffee price by taking up a position in the coffee futures market. They negotiate to secure a purchase price for a supply of coffee that they will require at some point in the future.
If these companies have successfully anticipated the path of coffee prices they should be able to take advantage of the current decline in prices, and the price of coffee for consumers “should fall 10 or 20 cents fairly rapidly,” Cordier told CNBC:
Reuters contributed to this report.