Agriculture Trading
I'm a few years away from obtaining an MBA and then hopefully working on Wall Street, but I decided to spend a bit of time on researching possible jobs. I have a large interest and knowledge of farming and the agriculture market in general. Do the investment banks trade agriculture products at all? How would one be placed into agriculture trading with an investment bank?
Thank you
Certain banks have agriculture desks, but most don't. I think the only way to really be placed there is if they happen to have an opening at the same time when you're applying. Agriculture trading desks tend to be on the small side. If you are really serious about agriculture you should probably be looking at specialist commodity trading houses like Cargill and Glencore; they have considerable advantages over most BB banks because they own so many physical assets and also have a ton of experience in this area.
ADM is also a big player in the soft commodities markets with a well established trading division. They even take on interns I believe. I would imagine that Goldman and Morgan Stanley who are very active in commodities trading also have ag desks. I know JPM has [a small] one. Also, companies like Mars and Hershey have commodities traders who deal with these markets for obvious reasons.
Thanks for responding. I am interested in other sectors, but agriculture has always been the one sector where I didn't mind reading and analyzing for hours on end. Do hedge funds actively trade in the agriculture commodities?
Citadel does commodities; not sure if that includes ag.
The biggest 3 commodities desks--Goldman/J.Aron, Morgan Stanley, and Barclays Capital all have ags desks.
The rest of the banks that are building out their commodities desks (JPM and Merrill, followed by Citi, CS, and Lehman) are mostly focusing on building out energy first, but will be building out ags capabilities if they haven't already...
no bank wants to be punting on commodities, so they are trying to build demand for structured products ... it's a slow process, imagine trying to get commercials to set up lines of credit, etc. with you just to buy a fancy derivative ... definitely a growth area though.
^ False. The banks with serious commodities businesses regularly make bets on commodities markets, and make quite a lot of money doing it. Many commodities trading desks make the vast majority of their money from taking directional views and/or arbitraging mispriced commodity derivatives -- both otc and exchange traded.
I think both of you are right. While the banks definitely do take proprietary positions, roughly half the profit on most desks comes from the sales and structuring sides. And that is almost entirely "structured" in some way--either just some sort of customized basic OTC derivative or a bespoke hedging solution. On that side a very small proportion of business is from the flow business, like basic nat gas or oil swaps, for example, while the bulk of the business is from designing some form of customized hedging strategies for corporates.
skins dont you think your just a little biased towards structured products because thats the area you work within? lol. Half profits from sales and structured products at most banks? Maybe this is the case for your bank but for most im not sure. We have repeatedly debated this and its clear you have a bias towards the structured products. I think its going to vary from desk to desk. Just be careful in your generalizations is all im saying.
You make a fair point, but let me clarify my wording. First, half of the profit being from sales is a pretty common situation across most of the trading floor. The goal for most desks from what I've seen is to try to get the profit from sales and structuring to be roughly 50% of the total desk P&L.
Next, as far as the breakdown of flow trading vs. structured products on a commodities desk that absolutely holds true at Goldman, Stanley, and Barclays. The commodities products sold to clients by investment banks are 100% OTC derivatives.
That said, I put "structured" in quotes because I'm not necessarily referring to the same type of "structured" as in CCOs, CDOs, etc. I'm just saying they are somehow customized. It may be as simple as changing the expiry of an option, or varying the volume of a swap month-to-month, but regardless, it's in some way altered from the standard contract.
So I guess I needed to clarify my earlier post. Because if you use the term "structured" to refer to using the sort of technology you would in a CDO or ABS, then you are definitely right--that constitutes a minority of the revenue on the major commodities desks. I was just trying to get across the point that commodities desks have little to no focus on exchange-traded, standardized products.
better to get a solid foundation on shops like cargill and louis dreyfus before moving into banks.
^That's incorrect. Commodities desks can and do make quite a bit of money using the firm's money to arbitrage or take views on exchange-traded, standardized products. Some hardly even have a client business, and focus predominantly on proprietary trading. Some desks specialize in customizing things for clients, but many with a given bank don't do this at all.
Nauru: you mind clarifying to whom you are referring? I'm asking because Goldman, Barclays, and Stanley are far and away the largest commodities desks on the planet. All 3 are literally orders of magnitude larger than most of their competitors, and all 3 have enormous client businesses.
At all 3 shops revenue brought in from clients (either corporates who hedge or investors who speculate) makes up a significant chunk of total revenue, and yes, is in fact usually close to half of total revenue.
If you are not referring to the desks at banks then I'm curious who you are referring to. And I'm all but guarantee that they are much smaller and make much less money in commodities than the banks.
Not to add too much fuel to the fire, but the ag desk I was on last summer focused solely on structured products, so obviously one model does not fit all.
Commodities Trading - Agricultural trading? (Originally Posted: 04/20/2007)
Oil/Energy trading is covered heavily by BBs, but commodities trading, esp agric commodities like corn futures trading doesn't seem so common (prolly cuz of the risks). However, how would a position as an agric commodities trader at a place like Cargill or any of the other commodities shops be viewed on the street? Is it looked down upon, or is it considered to be great experience?
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