Path to Commodities as Undergraduate Junior

Hi all,

I'm currently a junior at an IB/S&T target school with a sales & trading internship at an international bank in NYC this coming summer (think Nomura/SMBC/Mizuho). I am fairly certain that I'll be on the trading side of things based off my interviews, and I'm hoping to land on a derivatives desk based on my internal connections.

While I'm very excited for this internship, I have a long-term goal of ending up in the commodities trading space. Unfortunately the bank at which I'll be interning does not have a commodities desk like some BB's do. I genuinely recognize benefits of both physical and paper trading, and I think I would enjoy either given my personality. My questions for you all:

  1. Would my experience in the S&T internship help me in scoring full-time roles at majors, prop firms, and/or TDPs?
  2. Has anyone done this sort of path into commodities? Or do you have any recommendations for me to better position myself for a job in the space?
  3. What can I do now to make myself a better candidate? Whether that's book recommendations, program recommendations, etc.

I would appreciate any help. Thank you.

21 Comments
 

To break into commodities trading from your current position, here’s what you need to know based on the most helpful WSO content:

1. Leverage Your S&T Internship

  • Your upcoming S&T internship, especially if it lands you on a derivatives desk, will provide valuable transferable skills like market analysis, risk management, and pricing strategies. These are highly relevant to both paper and physical commodities trading.
  • Focus on networking within the bank and beyond. Even if your bank doesn’t have a commodities desk, you can connect with alumni or professionals in the commodities space through LinkedIn or industry events.

2. Positioning for Full-Time Roles

  • Majors (ABCD firms like Cargill, ADM, etc.): Highlight your trading experience and interest in commodities during interviews. These firms value candidates with strong analytical skills and a demonstrated passion for the sector.
  • Prop Firms: They often look for candidates with a strong quantitative background and trading experience. If you can demonstrate success in derivatives trading, it could make you a strong candidate.
  • TDPs (Trader Development Programs): These programs are highly competitive but are a great entry point into physical trading. Research firms like Trafigura, Vitol, and Glencore, and tailor your applications to their specific requirements.

3. Recommendations to Stand Out

  • Networking: Build relationships with traders in the commodities space. Attend industry events, reach out to alumni, and join relevant forums or groups.
  • Internships: If possible, secure an off-cycle internship at a commodity trading house, producer, or consumer. Even roles in logistics, trade finance, or operations can provide valuable exposure.
  • Skills Development: Learn about the specific dynamics of commodities markets. For example:
    • Physical Trading: Understand supply chains, logistics, and the nuances of physical delivery.
    • Paper Trading: Develop expertise in futures, options, and hedging strategies.
  • Books: Some highly recommended reads include:
    • “The World for Sale” by Javier Blas and Jack Farchy (for an overview of the industry).
    • “Oil 101” by Morgan Downey (for energy markets).
    • “Commodity Derivatives” by Neil C. Schofield (for paper trading insights).
  • Certifications/Programs: Consider programs like the Energy Risk Professional (ERP) certification or courses on commodities trading offered by institutions like the CME Group.

4. Actionable Steps Now

  • Research: Dive deep into the specific commodity markets you’re interested in (e.g., energy, metals, ags).
  • Cold Outreach: Reach out to professionals in the space for informational interviews. Ask about their career paths and advice for breaking in.
  • Internship Performance: Excel in your S&T internship to build a strong foundation and secure a return offer. Even if it’s not in commodities, a strong track record in trading will make you a more attractive candidate.

5. Pathways Others Have Taken

  • Many professionals in commodities trading started in adjacent roles like S&T, logistics, or trade finance before transitioning. For example:
    • Working at a freight forwarder, warehouse, or producer (e.g., coffee roasters or grain exporters) can provide valuable insights into physical markets.
    • Joining a bank’s trade finance team can help you understand the financial flows behind commodity transactions.

By combining your S&T experience with targeted networking, skill-building, and a clear focus on commodities, you’ll position yourself as a strong candidate for roles in this competitive space. Good luck!

Sources: Physical Commodity Trading, A few questions on getting started in physical trading, Q&A: I'm an Agricultural Commodities Trader, Q&A: I'm a Dry Bulk Physical Trader

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

for book recommendation, i would look at this dudes channel, you can just type books and see his two videos: 
Damien Würsten 

i think its worth also just looking at interviews of commodity traders on youtube to just get exposure to the industry. As to what you can do, familiarising yourself with data transformation and analysis as these are hard skills required in the industry. Then just general awareness of whats going on in the world by reading the news is always useful, trying to link that to insights as to why demand or supply of your commodity of choice is good practice, i recommend the economist as a starting point since it has wide general knowledge coverage. maybe with ur uni u can get it for free or at a heavy discount.

 

Thank you for these resources. Damien's channel looks especially helpful.

Regarding your second piece of advice, what would be your recommendation as to choosing a commodity to focus on? As in, would you happen to have any recommendations for getting exposure to the market structure/nature of trading different commodities? From the chats I've had it seems like traders mostly fall into their commodity rather than gun for it from the start.

 

your definitely correct in thinking that the vast majority of traders dont choose the commodity you trade. in your case i think its best to look at all and focus on one you enjoy to build your knowledge of what is commodity trading. a lot of concept carry over to other commodities, so when it does come to applying and things like this, you will have a solid understanding of the fundamentals when discussing your interest and how things work with the traders.

rn for example im reading books on agri trading and maritme and chartering while working in a certificates trading house. totally unrelated but it helps build general knowledge.

 

Thanks for the comment. I'm a double major in math so I'd say math, soft skills, and problem solving are my strongest skills, in that order. That said, I'd say I'm adequately capable at the other things you listed. Are you asking because the hard skills are better for paper and the soft skills are better for physical? Or something else?

 
Most Helpful

Yes, lean into your edge as hard as you can just like you would in any trading edge you have.

To answer your questions:

  1. Yes.
  2. Yes. I would use the internship to try to get a job at a physical shop after you gradudate. Knowing physical flows offers much more optionality down the road than just paper. The big shops like Vitol have paper traders. Banks don't have guys moving naptha on a pipe somewhere.
  3. Be willing to move anywhere and take any job. Biggest issue I see on this board is young guys not being willing to take a mediocre job or move somewhere they don't want to live long term. The physical job at a no name place in Houston being a diesel traders bithc for two years is better experience than the derivatives job at a bank in NYC if you really want to trade commodities. Go look at the backgrounds of the PM's at Citadel.
 

Hey I'm curious what you would recommend if someone's edge is indeed "thinking about second and third order impacts and how complex system interact" as you put it? Thought your wording was a good way to articulate a pretty important type of relative advantage that isn't explicitly talked about often enough.

 

Something very rule heavy like specializing in delivery of futures contracts and how convergence actually happens. When I mentioned that I also had physical trading in mind. If a country has a crop grown that doesn't meet a lot of buyers specifications what are the knock on effects as those buyers have to find supply elsewhere? Macro traders are usually good at this. To do this well you have to be able to make decisions with incomplete info. Often times there is data but not as much as you would like.

 

I personally did this path myself. The TDPs like S&T as it shows knowledge of derivatives and trading. Just make sure to learn the physical business through books.

 

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