This article explains the fundamentals of starting a coffee trading business from your home.
Coffee is one of the most highly traded commodities in the world. The market is estimated to be worth more than USD 100 billion annually. Here are a few notable things to know before you start trading coffee in Dubai.
DMCC Coffee Centre
The DMCC (Dubai Multi Commodities Centre) Free Zone is the largest free zone in the UAE, with more than 18,000 registered members as of 2021. It is also the best jurisdiction to get a coffee trading license in Dubai. You can read here on how to get a DMCC license.
The DMCC Coffee Centre offers unparalleled infrastructure and services for bean storage, processing, roasting, packing, and coffee delivery. It also has one of the few temperature-controlled coffee storage facilities in the GCC. The Centre is unique in that it can cater to traders, roasters, and retailers’ various needs. The site has enabled the trade of 100+ coffee varieties from regions such as Latin America, Africa, and Asia.
You don’t need to get any facilities of your own to engage in the coffee trade. Many traders get a DMCC license with a desk in a business center and conduct all their trading from their home’s comfort.
Understand the Market of Coffee Business
As with any trading business, you will need to establish where you will be getting your supply and to whom you will be selling the goods. In the coffee business, it pays to have diversified sources and buyers as the market can be highly volatile.
If you are exporting to global markets, you must meet international food safety practices. If you cannot comply with these requirements, you will not be allowed access to major markets such as the North American and European markets.
Buyers expect you to have implemented a food quality system to demonstrate your ability to control food safety hazards. If your food quality system is certified, that tells buyers that you are a trustworthy supplier with reasonable quality control. There are companies within the DMCC that can help you get certified if needed.
Another aspect to consider is to create a traceability system. This provides the origins of your coffee to all the parties in the supply chain. Many buyers in mature markets are looking for products from socially responsible production programs and environmentally sound producers. Big buyers in the coffee sector are willing to pay a premium as corporate social responsibility (CSR) programs become more prominent.
Pricing and Contracts
Export sales prices are always in US dollars no matter where you sell it. The prices are set commonly in the New York and London futures markets. You will need to have USD banking facilities for your DMCC business. Luckily, all major banks in the UAE provide accounts that allow you to transact freely in USD.
Specialty coffees fetch better prices than commodity coffees, but their prices still vary according to futures markets. The coffee market is volatile. If you want to establish a reliable relationship with buyers, it is imperative to respect your contractual obligations, regardless of the market changes.
If you export large quantities, hedging your coffee will protect you from risks due to market price fluctuations and avoid defaulting on contracts. Hedging is a trading operation that allows a trader to turn a less acceptable risk into a more acceptable one. Luckily, DMCC is full of companies that specialize in hedging and can give your business a hand.
Get Expert Help to Kickstart Your Coffee Trading Business!
Starting a new business on your own can be a daunting task. Even if you are a seasoned trader, unexpected things can pop up. Keep in mind that you do not have to face these obstacles alone; there are experts who can help you out. We offer a free consultation to all entrepreneurs! Contact us today to turn your dreams of a coffee trading business into reality.
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