AMA: I'm an Agricultural Commodities Trader

BOTT1702's picture
Rank: Gorilla | 502

I'm a senior trader with 8 years of experience in the ag markets. I currently trade physicals only but have traded futures and options to a small extent in the past as part of my hedge book. I have experience in grains and a wide variety of other ag byproduct commodities. Feel free to ask me anything.

Advice for breaking into commodities trading

Do whatever it takes to get to know people in the industry. This type of trading is very relationship driven which ends up making the hiring process more relationship driven. When looking at internships, don't just focus on ones with "trading" in the title--if you can find something at a trading company, no matter what the role, pursue it as it will give you the opportunity to be around traders.

What kind of data sets you monitor, on a macro level for agricultural commodities trading?

US and worldwide weather for rainfall and temperature, drought monitors, WASDE reports, import and export numbers...couple of others depending on what we're doing, but we get our best information from our procurement and agronomy people who do their own touring and crop scouting. We're more concerned about what's happening on a micro level for our suppliers and customers. Weather is a tricky thing in grains--you can have one guy with amazing yields because the temperature was right and the rains came when they needed to, and thirty miles up the road where the rains didn't hit, you have below average yields. You won't know that if you're just looking at macro data. The futures market pays more attention to it, but cash markets are more localized.

What are the hours like? Career progression and compensation?

Depends on who you work for and in what role. There's some seasonality in certain roles. For the most part, it's an 8 to 5 job if you're starting out in merchandising/procurement. Once you get into a true trading role though, you work the hours you need to work. Sometimes that's 70 to 80 hours per week, sometimes that means you take a Friday off and go play golf. You're responsible for your book of business, and if it's performing well, you get some leeway. The moment it stops performing well, you need to pick up the pace and fix it. Your comp is ultimately driven by what's on your P&L when your bonus is calculated, so you do what you have to do to drive your comp.

Compensation at the 10 year mark varies. If you're an average/middle of the road guy at that point in your career, it means you probably never earned your own P&L and are still doing procurement or merchandising work--high 5 figures plus bonus, or more likely you're out of the business. If you're an actual middle of the road trader with your own P&L, you'll be low six figures in total comp most years. High performers do much better than this. I once had a boss tell me when I was brand-new that the company's goal was to move new traders into the highest tax bracket possible as soon as possible--if you're not on that type of track as a trader, you probably won't have a long career.

Comments (145)

Apr 14, 2014

What advice do you have for someone interested in working in commodities? What is the best approach to get there?

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Apr 14, 2014
SouthernAlpha:

What advice do you have for someone interested in working in commodities? What is the best approach to get there?

Do whatever it takes to get to know people in the industry. This type of trading is very relationship driven which ends up making the hiring process more relationship driven. When looking at internships, don't just focus on ones with "trading" in the title--if you can find something at a trading company, no matter what the role, pursue it as it will give you the opportunity to be around traders.

Also, be open to different opportunities. This is a ground-up business, and while you certainly can start by working for a major company in a large metropolitan area, sometimes your best opportunity to start your career is going to be in a small town in the Midwest. If you're open to that possibility, you have more opportunities available to you.

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Apr 14, 2014

I'm very enthusiastic about pursuing physical trading as a career, either energy (oil/LNG) or ag markets whichever there's opportunity to get into. I have 3 years experience with international logistics, and at my current job I manage a very high volume of seafreight (container and bulk) and airfreight shipments.

How would you approach a trading career if you were in my shoes? What would be the first step?
Is there any further studies or additional skills I can pick up to make me stand out from the crowd?

Looking forward to your reply.

Apr 14, 2014
dannyja1:

I'm very enthusiastic about pursuing physical trading as a career, either energy (oil/LNG) or ag markets whichever there's opportunity to get into. I have 3 years experience with international logistics, and at my current job I manage a very high volume of seafreight (container and bulk) and airfreight shipments.

How would you approach a trading career if you were in my shoes? What would be the first step?

Is there any further studies or additional skills I can pick up to make me stand out from the crowd?

Looking forward to your reply.

Depends on what you're doing right now with logistics. If you're helping to broker freight, dealing with price negotiation, moving around bookings to get your customers the best rates, you have a better chance of getting on a desk than if you're just monitoring shipments or doing customs clearance and other paperwork. My advice is going to be the same as someone who's just coming out of college--you need to get to know traders. There is a huge containerized grain shipment market, both import and export, and obviously there's a large volume of bulk grain exports. If your company is doing any of this business, try to find a way to be in front of the traders who are doing that business and demonstrate to them that you have a skillset that helps them make more money. If you're doing more of a shipment management role, you probably have the skillsets needed to move to a trading assistant role, which can lead to a trading role if you're on the right desk (but it needs to be the right desk with the right company, otherwise you'll just end up being a logistics manager your whole career).

No good advice for you on additional studies. I'm always impressed when someone takes the time to learn about hedging or reads/attends the White Commercial Corp. programs, but I also worry that you'll try to do things "by the book" too much instead of learning practical skills on the desk. I generally try to get a read of how teachable someone is instead of focusing on what they've read/studied.

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Apr 14, 2014

Thanks for the feedback, much appreciated from a Trader's perspective.

I'm actually doing all of the above that you mentioned. Brokering freight, price negotiation, moving around bookings for the best rates, and most importantly shipment management. However I'm not working at a trading house or let alone an Ag/Energy/Metals/etc industry. I work for a large multinational chemical company and past experience working in the automotive industry, all have been operational logistics roles.

My main focus now is to get into the right company and also at the right desk as you suggested.
In your experience would a Trader hire someone who hasn't worked previously in a trading house or Ag industry?
Also are there other roles that you would suggest as an entry? A Trading Assistant position would be ideal however those don't pop up too often.

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Apr 14, 2014

1. What is your background (School/Major etc..)?

2. How did you get started in commodities trading?

3. What would be your advice for the best way to break in to physical trading for both undergrads and MBA students? (Basically SouthernAlpha's question as well)

Apr 14, 2014
ARMMonkey:

1. What is your background (School/Major etc..)?

2. How did you get started in commodities trading?

3. What would be your advice for the best way to break in to physical trading for both undergrads and MBA students? (Basically SouthernAlpha's question as well)

1. Finance major at a top-50 business school. No grad school.

2. I did a trading/brokerage assistant internship for one of the large ag companies. While I was there, I convinced my bosses to let me sit for my Series 3 test. I passed that and was promoted to analyst intern. I was also able to sit through classes on hedging and marketing. I received a full-time trading offer in March of my senior year which led me to where I am today.

3. See my response above.

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Apr 14, 2014
BOTT1702:

I'm a senior trader with 8 years of experience in the ag markets. I currently trade physicals only but have traded futures and options to a small extent in the past as part of my hedge book. I have experience in grains and a wide variety of other ag byproduct commodities. Feel free to ask me anything.

Been reading a lot about China giving up on the whole self sufficiency in grains policy / acknowledging their water supply constraints. It seems to me like ags might be the sole bright spot in this whole China deceleration bearish narrative. Thoughts?

Apr 14, 2014
contagoman:
BOTT1702:

I'm a senior trader with 8 years of experience in the ag markets. I currently trade physicals only but have traded futures and options to a small extent in the past as part of my hedge book. I have experience in grains and a wide variety of other ag byproduct commodities. Feel free to ask me anything.

Been reading a lot about China giving up on the whole self sufficiency in grains policy / acknowledging their water supply constraints. It seems to me like ags might be the sole bright spot in this whole China deceleration bearish narrative. Thoughts?

Possibly. I've never trusted the Chinese from an "official position" standpoint because they'll say one thing while trying to do the opposite and not get caught. Their actions this year, however, do back up their statements that they want to be less reliant on the US for grain shipments with their rejections of US cargo for GMO issues. One of two things is happening (or a combination of both): China is screwing with US exporters to try to get better concessions going forward, or they actually do care about some of these GMO issues and are legitimately rejecting cargoes. It will be interesting to see what the major export companies do going forward as most are not set up to segregate grain and IP different seed varieties. Even DDGS cargoes are getting rejected, which is making ethanol plants worried since export markets have become such a big part of their byproduct business. Makes me think that they might actually care about the GMO issue--especially with the rise of their organic acreage and the very tidy export profits that come with it.

I think there are some internal political issues at work too--farm reform in China has been a big issue for the last few years. Chinese farmers pay mandatory fees, have minimum purchase requirements for inputs, and can have their crop taken away at any time. Most are far away from the major metropolitan areas, and many have had their land taken for industrial use, which I imagine the state sees as a better return. You don't want a bunch of pissed off farmers controlling your food supply in an area of the country that is less-controlled than your major metropolitan areas. You also don't want a bunch of polluted grain to get into the food supply and piss off your rising middle class. Better to import the grain, have your farmers raise meat, greenhouse vegetables, and specialized export products and keep everyone placated.

Is it bullish for China? Probably not enough to make a huge difference. Is it bullish grains? A bit, but short of a significant drought corn doesn't have enough of a story to get bullish, and beans are where they have been for the last few years--tight carryout with limited upside because everyone is used to price rationing by now.

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Apr 14, 2014

I always wondered if the physical traders have ever actually been to a farm and/or have seen how the production works.

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Apr 14, 2014
AcctNerd:

I always wondered if the physical traders have ever actually been to a farm and/or have seen how the production works.

All joking aside, one of my favorite parts of the job is travelling to farms/feed mills/livestock operations/flour mills/etc. This can be a fun job if you like to get out and get your boots dirty every once and awhile.

Apr 14, 2014

Dang...people can't take a joke on Monday Morning.

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Apr 14, 2014

haha I can. +1SB for you

Apr 14, 2014

Thanks!

Apr 14, 2014

Congratulations for the promotion you got last month. Thanks for sharing your experience with us, it helps a lot especially those like me who want to start in this business from the bottom.

As you are specialized in Ag what would be the issues if you want to drive your career to other products such as energy ?

What do you think about the future of physical commodity trading compared to paper trading in IB (equities/derivatives and such) ? Here I'm referring to careers not macro or market analysis
Thank you again

Apr 14, 2014
tonixity:

Congratulations for the promotion you got last month. Thanks for sharing your experience with us, it helps a lot especially those like me who want to start in this business from the bottom.

As you are specialized in Ag what would be the issues if you want to drive your career to other products such as energy ?

What do you think about the future of physical commodity trading compared to paper trading in IB (equities/derivatives and such) ? Here I'm referring to careers not macro or market analysis

Thank you again

1. Biggest problem moving into another product line is that I don't know anyone in other product lines. I know one ethanol trader because I used to work with him--if I wanted to slide fields, I'd have to work my tail off to meet people in one of those fields. Even at this level, who you know matters. I've spent my career in ags, so that's who I know. I could move around all I want to in that arena, but there are barriers to entry to move industries. To overcome this, work for a diversified company that exposes you to different people in different product lines and you'll have a better chance of moving.

2. I'm no expert on the future of IB/equities trading since I don't know anyone in that business, but as far as physical trading goes, I think there's tremendous career opportunities for the right person. I'm not that old, so I hate to sound like this is a "kids these days" comment, but the majority of people who would have the skills to succeed in this field don't have the patience to learn it. You not only have to learn how to navigate markets, but you have to learn how to navigate people--how to deal with managing expectations, taking care of your customer, investing yourself not only in your own business but in the business of your counterparties. The skills to do those things take time, and patience is not a trait of most people today. It's even better when you consider that once you've proven yourself in the field, as long as you don't completely screw up, you'll be able to stay in it. I'm bullish physical trading opportunities.

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Apr 14, 2014

Thanks so much for doing this!

I'm very fascinated by ags, though I myself am a gas scheduler. What sorts of byproducts do you deal in? And where are you based out of?

Apr 14, 2014
Harbinger904:

Thanks so much for doing this!

I'm very fascinated by ags, though I myself am a gas scheduler. What sorts of byproducts do you deal in? And where are you based out of?

I'm based out of a large metropolitan area in the Midwest. Can't get much more specific than that as this is a small industry.

I've dealt in almost every byproduct out there--used to trade rice bran, millfeed, and hulls, hominy, cottonseed meal and hulls...even traded warehouse waste (think expired candies, chocolates, nuts, etc.). Also traded some animal byproducts, mostly feather and blood meal.

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Apr 15, 2014

Thanks so much for doing this BOTT1702. I have two questions.

Firstly, can you point out some differences in culture between Glencore and Cargill, if possible? I recognise that it may not be so straightforward and may be differ from office to office.

Secondly, one of my concerns at the back of my mind as I look to enter the ag trading world is the following; what is the fall back if things go wrong? I've seen traders fired and the ag space is a small world which you alluded to. Do firms hand out second chances to traders from other companies or do traders usually only get the one chance and move on to exit opportunities? What exit opportunities exist?

Many thanks!

Apr 14, 2014
TradingTheHouseDown:

Thanks so much for doing this BOTT1702. I have two questions.

Firstly, can you point out some differences in culture between Glencore and Cargill, if possible? I recognise that it may not be so straightforward and may be differ from office to office.

Secondly, one of my concerns at the back of my mind as I look to enter the ag trading world is the following; what is the fall back if things go wrong? I've seen traders fired and the ag space is a small world which you alluded to. Do firms hand out second chances to traders from other companies or do traders usually only get the one chance and move on to exit opportunities? What exit opportunities exist?

Many thanks!

1. I don't interact with Glencore on a daily basis (they don't trade in the markets I do) but I did interview with Viterra shortly after they were bought by Glencore and I wasn't blown away by the culture. This might have had something to do with the amount of turnover that was going on at the time, but it just didn't do it for me. In my experience, Cargill almost has two cultures--their trading groups are solid and perform well, they have great training programs, and I've had a couple of friends who've worked there who have nothing but good things to say. All of those things apply at their corporate headquarters, which is a beautiful campus in a great part of Minnesota. On the other hand, I've had friends who've worked at some of their plants and off-site locations, and they did not enjoy it as much. What I've heard from them is that those locations are overly structured, rigid, and don't offer the same opportunities as corporate. You'll likely be more prone to being moved from location if you perform well, as they tend to rotate their off-site merchandisers before bringing them back to corporate.

2. It depends on what happened, what you were trading, and who knows about it. If you're smart and you've built a good reputation with key people in the industry, you can rebound from being let go. Although it is a small world, you can move around between functions/products within the industry and not cross paths with people that you used to do business with. So much of it depends on your talent level--were you let go because of layoffs, a market mistake, political reasons, etc. or were you let go because you have no idea what you're doing? The latter will show in your resume and in an interview. The former usually means you have skills that are valuable and therefore you still have value in the marketplace. Your career path may be slowed down by being fired but it isn't necessarily over.

As far as other exit ops go, you generally see people stay in trading roles--working their way out of whatever junior role they start in, into a more senior role, eventually running a group or division. You've also got people that go out and start their own shops, and some of those guys do extremely well doing low-volume high margin business while having great work/life balance and flexibility. I've seen guys leave the trading side to go to logistics, risk management, brokerage, and some do consultant-type work. If you're good at trading, you tend to stay close to it, even if it's not in a direct trading role.

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Apr 15, 2014

I'm a commodities trading assistant and the person I assist is a hedging specialist with about 95% of his book dealing in hedging.

You said you switched from hedging to physical trading. What aspects do you like better about both of the two? My manager is trying to get me to go the hedging route once I finish my MBA because as the way he puts it, it's easy, guaranteed money for him because if we lose money in the futures market, our clients make money in the physical market so it's ok.

Apr 14, 2014
Skinnayyy:

I'm a commodities trading assistant and the person I assist is a hedging specialist with about 95% of his book dealing in hedging.

You said you switched from hedging to physical trading. What aspects do you like better about both of the two? My manager is trying to get me to go the hedging route once I finish my MBA because as the way he puts it, it's easy, guaranteed money for him because if we lose money in the futures market, our clients make money in the physical market so it's ok.

I interned at a brokerage house that did quite a bit of hedging for country elevators and that's where I first learned about hedging and basis and how grain moved. The pace at the brokerage was not the same as a trading floor--you're doing analysis and order entry and working a two-way information flow, but you're not really in the game, you're just watching it and reporting on it. Also, I don't think that's a high-growth field these days--if you're just doing order execution, that's become highly automated. It was different when I started and the pit and electronic markets were side-by-side and had similar volumes, but with all the volume in the electronic, you don't really need someone on the other end of the phone taking an order anymore. Obviously, there's still value in being a broker and working with clients to help them manage their hedge accounts, but I think even that work is going to consolidate, and as it does, commissions and fees will just keep getting lower and lower. Your guaranteed money has nothing to do with what the market does, only with how many transactions your clients are placing through you, and that's going to be more and more commoditized as the years go on.

From a flat-price standpoint, yes, if your client's hedge account goes down, the value of their cash position goes up. That doesn't mean that your client is making money though--they still have to trade their basis position, which determines if they'll actually make money or not. That's the whole purpose of the hedge, eliminate the volatile flat-price risk and assume the less-volatile basis risk.

Also worth noting, many of the products we deal with cannot be hedged. There's no direct futures market for them, and there's not enough correlation between their price and the board to consider hedging them. Of the twenty or so products that I deal with, I only have to worry about hedging three. Dealing with flat-price risk makes life a bit more interesting sometimes.

Apr 15, 2014

I was actually wondering about your sector the other way while reading a few articles on arabica in Brazil and the drought.

What kind of data sets you monitor, on a macro level? Brazillian countryside humidity levels?

Apr 14, 2014
FrancesFarmer:

I was actually wondering about your sector the other way while reading a few articles on arabica in Brazil and the drought.

What kind of data sets you monitor, on a macro level? Brazillian countryside humidity levels?

US and worldwide weather for rainfall and temperature, drought monitors, WASDE reports, import and export numbers...couple of others depending on what we're doing, but we get our best information from our procurement and agronomy people who do their own touring and crop scouting. We're more concerned about what's happening on a micro level for our suppliers and customers. Weather is a tricky thing in grains--you can have one guy with amazing yields because the temperature was right and the rains came when they needed to, and thirty miles up the road where the rains didn't hit, you have below average yields. You won't know that if you're just looking at macro data. The futures market pays more attention to it, but cash markets are more localized.

Apr 16, 2014

How do you think the tight US old crop soybean balance sheet will be resolved?

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Apr 14, 2014
wilder:

How do you think the tight US old crop soybean balance sheet will be resolved?

The record Brazilian harvest, the huge inverse in the futures market, continued Argentine selling, and terrible Chinese crush margins along with their credit issues will take care of the balance sheet. I think you realistically have to take at least 25-50 million bushels off the export line of the last WASDE report. Not all of it will go into carryout, but most will.

Apr 17, 2014

Is it typical too trade a whole range of products regularly? I can imagine in the byproduct space its more common since a lot of those end us a feed ingredients going to the same end users?

Also, is compensation similar between the guys trading grains (corn, soy, wheat ect.) and guys trading byproducts (DDGS, midds, soyhulls ect.)?

Apr 14, 2014
Sean518:

Is it typical too trade a whole range of products regularly? I can imagine in the byproduct space its more common since a lot of those end us a feed ingredients going to the same end users?

Also, is compensation similar between the guys trading grains (corn, soy, wheat ect.) and guys trading byproducts (DDGS, midds, soyhulls ect.)?

It varies across the industry and is dependent on the company and the individual. With larger companies, you tend to see more specialization--they have traders who only focus on a single grain, or a single byproduct and its derivatives (you see a lot of DDGS traders in that type of position). Other times, there's specialization by product similarity--for example, you might have a trader or a group that handles only mid proteins (like midds, hominy, gluten feed, etc.). And some companies break it out by territory and broad product group, so you might be responsible for all protein and fiber ingredients in a 10-state region, or all grain origination and truck trading across Kansas/Oklahoma/Nebraska. Hard to say that there's a general rule though, as there are plenty of small companies that do extremely well specializing in a niche market.

Comp in my experience is similar across all product groups--the variance in comp comes more from your role and the company you're with. There's quite a bit of variance across the industry in the way comp is structured.

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Apr 17, 2014

A lot of the big commodity trading powerhouses recruit undergrads into their back office positions to help them learn the business. What is your opinion on this path? Do you see people moving from back office positions to trading roles often?

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Apr 14, 2014
packmate:

A lot of the big commodity trading powerhouses recruit undergrads into their back office positions to help them learn the business. What is your opinion on this path? Do you see people moving from back office positions to trading roles often?

If we're talking about the same type of back-office roles (accounting, system support, etc.) then no, I never see back office roles making it to the trading floor. Some middle-office roles can, but in my experience, when dealing with the bigger ag companies, they have very well-designed programs for the development of their junior people. Sometimes those programs include short rotations in the back office to get an understanding of how to operate the contract entry and accounting systems. There are probably smaller companies out there that have taken their back office people and moved them to trading roles over time, but I'd imagine that's a long process as you don't pick up much on the actual markets working in the back office.

Apr 17, 2014

Sorry I meant middle office. Do you mind elaborating on the junior development programs? I have yet to find one online.

Apr 17, 2014

As the red headed stepchild of the finance industry us insurance folk aren't as technical as you fancy trader guys, so I am sorry if this question seems to elementary. I am curious about what risk transfer or traditional insurance products affect the valuation of these commodities and/or their futures? Do cargo liability, crop insurance and/or contaminated products insurance come into play at all, or do these only affect the commodity brokers and those in logistics who take physical possession?

Apr 14, 2014
P_C_Underwriter:

As the red headed stepchild of the finance industry us insurance folk aren't as technical as you fancy trader guys, so I am sorry if this question seems to elementary. I am curious about what risk transfer or traditional insurance products affect the valuation of these commodities and/or their futures? Do cargo liability, crop insurance and/or contaminated products insurance come into play at all, or do these only affect the commodity brokers and those in logistics who take physical possession?

Risk transfer is important in our business. Crop insurance affects local cash markets by driving sales--I'm not an expert on it, but my understanding is, for most crops, you have to have some forward sales on to establish the value that you're paid out on in case of natural disaster or crop failure. I have a friend who does cargo insurance for one of the big ag companies--from what he tells me, if you're that big, its better to have your own group that can shop around and save you money vs. having the shipping line handle your insurance. I'd imagine that the pricing on those contracts can be extremely tricky as you're essentially dealing with cargoes that have a value that changes almost every minute of the day. As far as how all of these affect pricing, they're wrapped into your cost of doing business, so you have to factor that into your bids and offers, but they don't really affect how the board trades unless the cost of insuring cargoes were to go up or down, which would impact export sales.

Apr 14, 2014
P_C_Underwriter:

As the red headed stepchild of the finance industry us insurance folk aren't as technical as you fancy trader guys, so I am sorry if this question seems to elementary. I am curious about what risk transfer or traditional insurance products affect the valuation of these commodities and/or their futures? Do cargo liability, crop insurance and/or contaminated products insurance come into play at all, or do these only affect the commodity brokers and those in logistics who take physical possession?

price risk can mostly be hedged (except for physical premium/discount)

freight rates can be locked in for certain routes using FFA's, but this only applies to a few very liquid routes, and is probably only an option for oil and iron ore traders

credit risk can be eiminated by selling the invoice to a bank, or through credit insurance companies like coface etc

obviously you also insure any cargo in your posessions

Apr 17, 2014

how is the grain trader's salary compare with those stock trader and bond trader?

Apr 14, 2014
yang-liu2:

how is the grain trader's salary compare with those stock trader and bond trader?

Not 100% sure because I don't have a good handle on equity trading salaries. My thoughts would be that, in general, your starting salary is going to be lower, but you're also going to have a lower cost of living as most of these jobs are in the Midwest. As you get down the road, base salaries tend to plateau, but you get better bonus opportunities. I know guys in the physical world that pull down 7 figure bonuses, which I think would put you on par with someone in the financial world.

Apr 17, 2014

thank you so much!

Apr 21, 2014

How is the interview process structured and what kind of questions are usually asked? Are questions asked about macro-economic events, weather or product specific stuff?

Thanks a lot for this AMA.

Apr 14, 2014
Walkerr:

How is the interview process structured and what kind of questions are usually asked? Are questions asked about macro-economic events, weather or product specific stuff?

Thanks a lot for this AMA.

I did a blog post on this that might help:

http://www.wallstreetoasis.com/blog/what-i-look-fo...

Both my internship interview and the interview for my first full-time job were much more about fit, personality, work ethic, learning style, and character examples. There wasn't anything regarding products or market knowledge--honestly, I almost blew my internship interview by saying something about the crude oil market that I was then asked to elaborate on, which I had no idea how to do. In my mind, having the right personality and work ethic will always get you the job over the person who comes in and starts rattling off the exact drought measurements in Kansas and what they mean for the overall world wheat market.

Interviews when moving companies after you have experience also focus quite a bit on fit and personality, along with skillset, but even then, you don't necessarily talk about specific market insights. The focus is more on your trading style and how does it fit in with the group and the overall company strategy.

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Apr 22, 2014

Wow, dealing with twenty products is an incredible feat. My desk is strictly DDGS [rail/containers/trucks] and it seems there is never enough time in the day. Thanks a lot for the post, as it is quite informative and accurate.

"Salesmen and traders are wild, cunning, aboriginal creatures who advise money managers about deceiving their bosses and finding new strip bars; their favourite phrase is, "Fuck you." IBankers eat fruit. Salesmen and traders eat meat, preferably fried."

Apr 14, 2014
sn0wie:

Wow, dealing with twenty products is an incredible feat. My desk is strictly DDGS [rail/containers/trucks] and it seems there is never enough time in the day. Thanks a lot for the post, as it is quite informative and accurate.

There are never enough hours in the day. In my experience, the DDGS market is so vast that you have to be a specialist in it to make it work--you just leave too much money on the table if you're not. I've known some very successful DDGS traders, and it's a fun market (as long as you're not getting cargoes rejected in China).

I'm fortunate that my current market is more of a niche field where the number of counterparties is limited, so we can handle having multiple product groups without totally screwing ourselves up.

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Apr 23, 2014

@BOTT1702: have you seen commercial (merchandiser/sales/trading) people swing between agris and energy/refined products (distillates, petchems etc)? if so what stage of their career and whether inside/outside their company? Finally, what is your opinion on that? Thanks

Apr 14, 2014
John-Hendricks:

@BOTT1702: have you seen commercial (merchandiser/sales/trading) people swing between agris and energy/refined products (distillates, petchems etc)? if so what stage of their career and whether inside/outside their company? Finally, what is your opinion on that? Thanks

It happens, but you need to know people in the field you're going into. Personally had it happen on my desk only once, and that was because the trader knew the guy he was going to work for who knew someone at one of the major energy companies that wanted to start an ethanol desk. That was probably 10-12 years into this guy's career. You can probably pull it off at any point if you know the right people.

Personally, I don't have any desire to leave ags, but I don't hold anything against anyone who does. You have to find the right product group that works for you, and more importantly, the right desk that works for you. If you don't do that, you won' find any happiness in this business.

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Apr 25, 2014

Not sure if you answered this, if you did whoops. How many different firms have you worked for your in career, why did you change shops, was it easy to do? How often do you see people leaving/joining your firm?

Best Response
Apr 14, 2014
marcellus_wallace:

Not sure if you answered this, if you did whoops. How many different firms have you worked for your in career, why did you change shops, was it easy to do? How often do you see people leaving/joining your firm?

I've been in a full-time role with three companies in my career, and was with a fourth part-time while in college. All of my moves have been come about from trying to find the right desk for me that presented the right opportunity--when you're right out of college, you go where you have a job, but once you've acquired some experience and made some contacts, you can move laterally within the industry and it does happen. I started in grains, made a move to work in feed ingredients, and then made a move back to a position where I trade and oversee the trading of both. I like working on a desk with multiple product groups, so that's a good fit for me. Some guys like single product groups. Either way, you work your way into the position you ultimately want.

You see guys who spend their entire career with one firm, you see guys who change shops every two to three years, and you see guys who start with one firm, leave for a couple of years, and come back to their original firm. You see guys who spend 20 years with their first firm and then leave to go run a division at another company. Once you get outside of the big companies, your opportunities can be somewhat limited by the size of your company and its ownership structure. If you're someone that wants to spend their entire career trading a book, you might not find a reason to leave, but if you want to run a group or move into a management role, you might have to move to a different shop to make that happen. Ease of movement is determined by the people you know and how well those people like you. For as big as our market is, we're a small, relationship-driven industry, and those relationships matter most to your career. I haven't been at my current firm long enough to see anyone come and go, especially because we're growing, but overall in the industry there's always movement and you usually see one or two big names make a move every year. You will also see entire desks pack it up and move companies from time to time--less frequent than individuals making moves, but when you have a strong guy as the head of a desk, his people will follow him if he thinks there's a better opportunity out there.

    • 7
Apr 25, 2014

Thx, gave you some SBs.

Apr 27, 2014

Would a masters in agribusiness be worth obtaining? I currently have my bachelors in finance. I received financial aid that would pay for the tuition 100% to go to a school that does have good ties with some of the ABCD ag companies. The job that I'm looking to get would be a merchandiser program. Do you think it would be worth going to school for the year and a half, or keep looking for a job in one of the smaller to midsize ag companies, and then later on switching to a bigger company. I have heard that it is extremely unlikely for me currently to get in with one of the bigger firms at the merchandiser training programs because they only hire straight out of college.

Apr 14, 2014
bananafudge:

Would a masters in agribusiness be worth obtaining? I currently have my bachelors in finance. I received financial aid that would pay for the tuition 100% to go to a school that does have good ties with some of the ABCD ag companies. The job that I'm looking to get would be a merchandiser program. Do you think it would be worth going to school for the year and a half, or keep looking for a job in one of the smaller to midsize ag companies, and then later on switching to a bigger company. I have heard that it is extremely unlikely for me currently to get in with one of the bigger firms at the merchandiser training programs because they only hire straight out of college.

I don't think the degree is necessarily going to help you, but if the school has good connections and allows you to get in front of people in the business, that will help. You're correct that most trainee programs only hire straight out of college, however, many of the mid-sized companies want 1-2 years of working experience for their junior programs so looking in that area might be more productive than focusing on ABCD firms right now. Also depends on what you're currently doing right now and how transferrable your skills and story are.

    • 1
Apr 27, 2014

Thanks for posting this. Have you noticed anything changing from algorithmic trading? If so, is it more long-term or short-term impact? What have you done to adapt to it?

Apr 14, 2014
Ponzi_Scheme:

Thanks for posting this. Have you noticed anything changing from algorithmic trading? If so, is it more long-term or short-term impact? What have you done to adapt to it?

Hasn't had any impact on my business. I'm sure that it's had some impact on the futures markets, and if you're involved in that arena you might see some changes, but for what I do with them, which is all hedging, there hasn't been any change. I'd be willing to bet an obscene amount of money that, because of the nature of the physical ag markets, you'll never see algo trading impact it in any significant way.

Apr 27, 2014

Thanks BOTT. Very interesting post, and much appreciated for your time.

Apr 14, 2014
Ponzi_Scheme:

Thanks for posting this. Have you noticed anything changing from algorithmic trading? If so, is it more long-term or short-term impact? What have you done to adapt to it?

sugar flash crash of '11..

Apr 28, 2014

Hi Bott, appreciate this AMA.

In terms of pricing dynamics, my broad understanding is that there are individual subtleties associated with each agricultural product. Would like to hear you out in terms of transferability of skill sets; would a say Grain trader be able to transfer his knowledge towards CPO?

Going deeper, fair to say that given the specific nature of each Ag product, it isn't uncommon to specialise in a certain product as you get more senior in your career?

Thanks in adv

Apr 14, 2014
Jk-Chong:

Hi Bott, appreciate this AMA.

In terms of pricing dynamics, my broad understanding is that there are individual subtleties associated with each agricultural product. Would like to hear you out in terms of transferability of skill sets; would a say Grain trader be able to transfer his knowledge towards CPO?

Going deeper, fair to say that given the specific nature of each Ag product, it isn't uncommon to specialise in a certain product as you get more senior in your career?

Thanks in adv

The dynamics are different among product groups. You have seasonality, weather, import/export variables, expansion and contraction of industries, plant runtimes...each product does have its own supply/demand profile. That said, if you're good and have some experience, learning the basics of a new market in a very short amount of time is reasonable if you move product groups. Many of the skills are transferable, but not all of them. Risk management, for one--handling basis risk is much different than handling flat price risk. Storage and inventory management is another--if you've never dealt with grading, shrink, and conditioning of grain, there's a pretty big learning curve coming from a position where you buy byproducts from plants. Dealing with personalities--if you've never dealt with the farmer, and your new role requires you to do so, you have to learn how to think like a farmer and get used to marketing patterns. So while you can move between product groups, you have to understand that you will have new skills to acquire before you become as competent in your new field as you were in your own.

Specialization is common even from the beginning of your career, but specialization can have different meanings. For example, suppose you specialize in trading protein feeds in the Mid South--you might be dealing with a dozen types of feed ingredients. You're less of a specialist in the overall products, and more of a specialist in the region--understanding the customers, suppliers, freight providers, and everything else that drives the Mid-South market. The same applies to customer type--you might work with dairies in the PNW as an example. Or, you might start your career procuring grains for an elevator, work your way up to merchandiser, and get hired away as an export corn trader--spending your whole career trading only one, maybe two grains. The beauty of this business is how varied it is; from the well-defined tracks of the ABCD companies to the niche prop shops that hire gunslinger traders looking to make six-figure incomes trading anything they can get their hands on.

Apr 27, 2014

Would you be able to tell how many hours per week someone works while going down this career path? Lets say in the first couple of merchandising years and then in year 10 when you might be a trader? What would the average or middle of the road trader make in year 10?

Thanks for all the information!

Apr 14, 2014
bananafudge:

Would you be able to tell how many hours per week someone works while going down this career path? Lets say in the first couple of merchandising years and then in year 10 when you might be a trader? What would the average or middle of the road trader make in year 10?

Thanks for all the information!

Depends on who you work for and in what role. There's some seasonality in certain roles. For the most part, it's an 8 to 5 job if you're starting out in merchandising/procurement. Once you get into a true trading role though, you work the hours you need to work. Sometimes that's 70 to 80 hours per week, sometimes that means you take a Friday off and go play golf. You're responsible for your book of business, and if it's performing well, you get some leeway. The moment it stops performing well, you need to pick up the pace and fix it. Your comp is ultimately driven by what's on your P&L when your bonus is calculated, so you do what you have to do to drive your comp.

Compensation at the 10 year mark varies. If you're an average/middle of the road guy at that point in your career, it means you probably never earned your own P&L and are still doing procurement or merchandising work--high 5 figures plus bonus, or more likely you're out of the business. If you're an actual middle of the road trader with your own P&L, you'll be low six figures in total comp most years. High performers do much better than this. I once had a boss tell me when I was brand-new that the company's goal was to move new traders into the highest tax bracket possible as soon as possible--if you're not on that type of track as a trader, you probably won't have a long career.

May 2, 2014

Thoughts on next Friday's WASDE?

Apr 14, 2014
blender:

Thoughts on next Friday's WASDE?

Neutral to slightly bullish corn, bearish beans. Less corn acreage on this one but I think they'll adjust yields up to the 160ish range. At some point feed use has to be 200-300 million lower simply because of a lack of livestock, but I don't think they'll do that in this report. Bean acres will be up, yields are probably steady, and carryout will probably be up on the acreage. They need to revise the export number down at some point, but again, not sure they will with this report. Beans are like musical chairs right now--short term bullish but everyone knows what the real S/D is and nobody wants to be caught long when the reported numbers catch up with reality. Wheat is going to read bullish on reduced US winter wheat harvest but ultimately US wheat doesn't matter as much anymore in the global scheme, so you won't get a long-term boost.

May 4, 2014

Thanks for sharing your experience.

After completion of a BA in business administration I'm working at one of the biggest commodity firm as operation trainee. I can get a two year trainee program in operations at the same company but hesitate to go back to university for a strong quantitative MSc in Finance.

What's best in order to become junior trader ? What are the required quantitative skills to become a trader ?

Apr 14, 2014
hhadri:

Thanks for sharing your experience.

After completion of a BA in business administration I'm working at one of the biggest commodity firm as operation trainee. I can get a two year trainee program in operations at the same company but hesitate to go back to university for a strong quantitative MSc in Finance.

What's best in order to become junior trader ? What are the required quantitative skills to become a trader ?

As long as the commodity company you're talking about is in the grain markets, skip the masters and do your two year stint in operations. You'll get exposure to merchandising and can move into a full-time merchandising/procurement/trading role once you finish your operations experience. There is little to no quantitative skills required to trade physicals--your hands-on experience is much more important.

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Jun 8, 2014

Hey thanks for the AMA. I had two questions. Do you think getting a Series 3 gives you much of a leg up? And are there any books related to physical trading you'd recommend?

Thanks!

Apr 14, 2014
ilibonig:

Hey thanks for the AMA. I had two questions. Do you think getting a Series 3 gives you much of a leg up? And are there any books related to physical trading you'd recommend?

Thanks!

Your Series 3 is helpful if you want to do certain things. If you're just in a trading role, you generally don't need it because you're not in a client-based business. However, certain roles in the procurement and country operations tracks require you to have it because you're providing advice and market commentary to farmers and are helping them do their hedging. I started in brokerage so I had to get mine right away, but I let it lapse years ago and doubt that I'd ever need to get it again.

The only book I ever recommend from a technical standpoint is The Art of Grain Merchandising by White Commercial Corp.

Jun 9, 2014

In what ways the rice trading is less structures (cf. futures) than the other ags markets?

Apr 14, 2014
thuram02:

In what ways the rice trading is less structures (cf. futures) than the other ags markets?

Not 100% sure what you're asking. I have limited experience in the rice trade that consists of trading domestic byproducts. Rice in general is a much smaller market on the board than grains. Like most markets, you have the large firms that dominate overall trade and a number of small companies that work in niche positions. My current company has a small rice desk that deals with flat price positions only.

Jul 7, 2014

what do you read regularly? anything as authoritative as Metal Bulletin in the ag markets? other than
art of grain merchandising and merchants of grain, do you have any book recommendations?

Apr 14, 2014
LLcoolJ:

what do you read regularly? anything as authoritative as Metal Bulletin in the ag markets? other than

art of grain merchandising and merchants of grain, do you have any book recommendations?

I read a number of different commentaries from brokerage houses (FC Stone, CHS Hedging, and a couple of smaller analysts), USDA reports, some weather reports from various meteorologists. Informa reports, especially Feed Ingredient Daily when I was moving more feed products. A couple of specialized publications that are unique to my markets. We have an internal research department so I get some stuff from them as well on what they're seeing for grain conditions during the growing season. I used to read Gartman but found that was more of a guilty pleasure than legit research so I gave it up.

Other than those two books, I've read the usual physical trading suspects: Metal Men, King of Oil, the Market Wizards series (the interview with Bill Lipschutz in The New Market Wizards had a profound effect on how I viewed and took my career), and anything else that has to do with trading and risk. None of those books are going to make you a trader, but they do help you understand, to some extent, the mindset that you need to be a trader.

May 2, 2014

Another down-day for corn post WASDE--heard talks of physical sold way out in November with an insane basis (2.50ish corn). Where do you see (if any) support for corn?

Apr 14, 2014
blender:

Another down-day for corn post WASDE--heard talks of physical sold way out in November with an insane basis (2.50ish corn). Where do you see (if any) support for corn?

Logically, I think you have to find support somewhere around $3.25 to $3.50 on the Dec. Short-term feed use is going to be lower, but with margins so good I can't see livestock producers not taking this opportunity to put on forward corn for next year and lock in some profits. You're also trading below production costs, so either the board or local basis needs to firm if you're going to overcome the psychological roadblock for the farmer of selling at a loss--they'd rather keep the crop in on-farm storage and wait for a turnaround.

All that said, I won't be surprised if we trade under $3.25. There's so much bearish sentiment in the market and it's hard to make any kind of compelling case for a turnaround in corn. Expect to find support, but when we do, I think we're trading sideways for a long time until the fundamentals change.

Jul 22, 2014

What can I do from from a retail standpoint to satisfy my unquenchable thirst for gambling? How would you approach betting on ag with a $100k bankroll, and where do you think an individual could find an edge assuming an unlimited amount of time to develop that edge?

Great thread, thank you.

Jul 23, 2014

LOL. Buy/sell some futures before a WASDE report and see what happens.

Jul 28, 2014

What is something someone working in the back or middle office for your product could ask you that would impress you or demonstrate an informed interest in the market?

Apr 14, 2014
TXEcon:

What is something someone working in the back or middle office for your product could ask you that would impress you or demonstrate an informed interest in the market?

I don't think there's any specific question someone in the back or middle office could say. Unless you're in the market, it's hard to have an informed interest in the market, and very few back office people actually understand what we do. Middle office is different because they're interacting with us on a daily basis and helping with execution. I think it's more the way the question is asked--you can tell when someone has a genuine interest in something vs. when they're just faking it to try to impress.

My boss is of the age when most people start to think about retiring. We were discussing this the other day, and his comment was he doesn't know what he would do with himself if he wasn't in the markets every day. I've known guys that have worked into their mid 70's just because they love the game so much. If you want to be a trader, and you want my help getting there, then I want to see something in you that makes me think you love the game like that. Ask me a question, any question, in a way that shows me that, and I will be impressed.

Sep 2, 2014

I realize I'm a bit late to the party here but, just curious, do you ever see people move from metals/energy trading to softs at a junior trader level?

I know a few people who have gone from trading ags to metals/energy (and a few people who are actively trying to) but haven't come across anyone who's gone the opposite way...

Apr 14, 2014
mehtal:

I realize I'm a bit late to the party here but, just curious, do you ever see people move from metals/energy trading to softs at a junior trader level?

I know a few people who have gone from trading ags to metals/energy (and a few people who are actively trying to) but haven't come across anyone who's gone the opposite way...

I don't personally know anyone who made that type of move, but you do hear about it and it does happen.

May 2, 2014

Where would you see a bottom for DEC Corn? Cash basis corn in some parts make it practically free and the yields are amazing.

Apr 14, 2014
blender:

Where would you see a bottom for DEC Corn? Cash basis corn in some parts make it practically free and the yields are amazing.

I'd said $3.25 some time ago and still think that's not a bad guess, although if we dipped to/under $3 I won't be surprised. Aside from the supply glut and stagnant demand, you have some serious logistics problems that has everyone in the country scared--nobody wants to be in the same position Canada was last year with their small grain harvest. If the railroads can't step up and perform this fall, you'll see basis values drop even more and many places will go no-bid for lack of storage. This year has the potential to cost the farmer millions-not exactly what you expect from a bumper crop.

Sep 12, 2014

thanks for your time

Apr 17, 2014

1. Could you please tell me what type of trader is the most popular in this industry so far? (fundamental,tech or quant)
2. what kind of trader can work in CTA? I heard quant trader is more dominated in this industry, it that true?

Apr 14, 2014
yang-liu2:

1. Could you please tell me what type of trader is the most popular in this industry so far? (fundamental,tech or quant)

2. what kind of trader can work in CTA? I heard quant trader is more dominated in this industry, it that true?

1. You don't really have a fundamental/technical/quant breakdown in physicals. Physical traders are working in the fundamentals of the market. Our trading is driven by relationships and analysis but ultimately comes down to moving a product from Point A to Point B and making money doing it.

2. CTAs can be any style--you have quants, fundamentals, technical, blended--just depends on the clientele they are catering to.

    • 1
Apr 14, 2014

I interned a niche commodity trading firm and I was assisting the MD with hedging, market research, trade finance, price quotations (OTC market) and logistics (incoterms, follow up...) and a bit of marketing for client (linked to market research). Assistant trader is the more relevant term ?

Thank you

Apr 14, 2014
tonixity:

I interned a niche commodity trading firm and I was assisting the MD with hedging, market research, trade finance, price quotations (OTC market) and logistics (incoterms, follow up...) and a bit of marketing for client (linked to market research). Assistant trader is the more relevant term ?

Thank you

Trading Intern, Assistant Trader Intern, Trading Assistant Intern...doesn't really matter vs. the experience.

Apr 14, 2014

Thank you very much

Feb 16, 2015

Hi I was an intern in a Singaporean trading company last year and I've got some questions I can't answer myself.

If I may shoot, I start with two:
1. Singapore used to be a good trading hub, where the trading companies make money connecting buyers and sellers. But in recent years I've seen that people start to become smarter. Factories go direct to export to end buyer, and vice versa. This is probably due to B2B platforms like Alibaba and Linkedin. I see that, unless Singapore is the end buyer (importing for Singaporean market) or the producer (having their factories in Tuas etc), or at least affiliated with the plantation (like Golden Agri), there is no reason really for a Vietnamese restaurant chain to buy Hungarian salamis though a Singaporean trading company. Is that view correct? My ex-boss told me it all depends on how I pitch but I am not satisfied with the answer, because ultimately trading is price game. What then, is Singapore's edge in commodities trading?

2. Why is asking for a CIF quote from a freight forwarder took so long? It took me many hours to get quote for shipping. If included insurance it can take days. I believe it is inefficient and we can't quote our clients fast enough because of it. Is there a way to automate the processes, like how online insurance quote work - or best yet, a system where multiple freight forwarders can submit bids then we can hit the best one. Then perhaps we can quote faster to our clients and win more deals.

    • 1
Jul 26, 2015
shanghaiisamazing:

2. Why is asking for a CIF quote from a freight forwarder took so long? It took me many hours to get quote for shipping. If included insurance it can take days. I believe it is inefficient and we can't quote our clients fast enough because of it. Is there a way to automate the processes, like how online insurance quote work - or best yet, a system where multiple freight forwarders can submit bids then we can hit the best one. Then perhaps we can quote faster to our clients and win more deals.

www.freightos.com ????

    • 1
Jul 23, 2014
16rl:

shanghaiisamazing:
2. Why is asking for a CIF quote from a freight forwarder took so long? It took me many hours to get quote for shipping. If included insurance it can take days. I believe it is inefficient and we can't quote our clients fast enough because of it. Is there a way to automate the processes, like how online insurance quote work - or best yet, a system where multiple freight forwarders can submit bids then we can hit the best one. Then perhaps we can quote faster to our clients and win more deals.

www.freightos.com ????

SBs to you two for teaching me a valuable lesson on the benefits of scale.

Sep 2, 2014
shanghaiisamazing:

Hi I was an intern in a Singaporean trading company last year and I've got some questions I can't answer myself.

If I may shoot, I start with two:
1. Singapore used to be a good trading hub, where the trading companies make money connecting buyers and sellers. But in recent years I've seen that people start to become smarter. Factories go direct to export to end buyer, and vice versa. This is probably due to B2B platforms like Alibaba and Linkedin. I see that, unless Singapore is the end buyer (importing for Singaporean market) or the producer (having their factories in Tuas etc), or at least affiliated with the plantation (like Golden Agri), there is no reason really for a Vietnamese restaurant chain to buy Hungarian salamis though a Singaporean trading company. Is that view correct? My ex-boss told me it all depends on how I pitch but I am not satisfied with the answer, because ultimately trading is price game. What then, is Singapore's edge in commodities trading?

2. Why is asking for a CIF quote from a freight forwarder took so long? It took me many hours to get quote for shipping. If included insurance it can take days. I believe it is inefficient and we can't quote our clients fast enough because of it. Is there a way to automate the processes, like how online insurance quote work - or best yet, a system where multiple freight forwarders can submit bids then we can hit the best one. Then perhaps we can quote faster to our clients and win more deals.

  1. No, physical traders aren't just telephones. There is a lot of value to information still but that's not your only value add. At a basic level, you absorb (or reallocate) risk for both producer and end consumer, provide flexibility (and stability) and (depending on your size) leverage economies of scale. Hungarian salamis are maybe a bad example. Imagine instead that you are a Vietnamese extruder who wants to buy Hungarian aluminum. Since it takes you a month to process it into shiny aluminum profiles that can be sold, you would like to have 30 days of credit on the material. A producer's not going to give you that.
  2. We're all working with the same (admittedly archaic) system here but it shouldn't be taking days. Chase chase chase.
Apr 14, 2014
shanghaiisamazing:

Hi I was an intern in a Singaporean trading company last year and I've got some questions I can't answer myself.

If I may shoot, I start with two:
1. Singapore used to be a good trading hub, where the trading companies make money connecting buyers and sellers. But in recent years I've seen that people start to become smarter. Factories go direct to export to end buyer, and vice versa. This is probably due to B2B platforms like Alibaba and Linkedin. I see that, unless Singapore is the end buyer (importing for Singaporean market) or the producer (having their factories in Tuas etc), or at least affiliated with the plantation (like Golden Agri), there is no reason really for a Vietnamese restaurant chain to buy Hungarian salamis though a Singaporean trading company. Is that view correct? My ex-boss told me it all depends on how I pitch but I am not satisfied with the answer, because ultimately trading is price game. What then, is Singapore's edge in commodities trading?

2. Why is asking for a CIF quote from a freight forwarder took so long? It took me many hours to get quote for shipping. If included insurance it can take days. I believe it is inefficient and we can't quote our clients fast enough because of it. Is there a way to automate the processes, like how online insurance quote work - or best yet, a system where multiple freight forwarders can submit bids then we can hit the best one. Then perhaps we can quote faster to our clients and win more deals.

  1. Trading is more than a price game. It is also a service game, a risk management game, a credit game, a cash flow game, a liquidity game, and a relationship game. Trading companies can do a great deal to provide more than just the best price to a customer. Take your Hungarian salami example--suppose the restaurant contracts directly with the salami manufacturer. What happens if the manufacturer has a production shortfall and can't deliver on the contract? Or wants obscene terms for payment? Or delivers product that doesn't meet the contract specifications? Trading companies can provide insurance against all of these situations by being in the middle.
  2. Freight forwarders are inefficient, but so are steamship lines, so I guess I can't really blame them. I agree that this is a market that needs to improve.
Apr 1, 2015

I have a question. I was offered an internship for one of the smaller grain traders who have headquarters in Zurich. They 'compete' buy and by fob from some of the majors that have ocean export elevators. I don't understand how they can buy fob from a major and sell to end users in the far east as wouldn't they always be a little bit more expensive as they don't hedge in futures market till they make a sale. Assuming their freight is similiar and they sell to end users in asia on a flat metric ton price and they buy basis how do they successfully price to make a sale when they compete against majors? Is there something I am missing?

Apr 14, 2014
countrygrain:

I have a question. I was offered an internship for one of the smaller grain traders who have headquarters in Zurich. They 'compete' buy and by fob from some of the majors that have ocean export elevators. I don't understand how they can buy fob from a major and sell to end users in the far east as wouldn't they always be a little bit more expensive as they don't hedge in futures market till they make a sale. Assuming their freight is similiar and they sell to end users in asia on a flat metric ton price and they buy basis how do they successfully price to make a sale when they compete against majors? Is there something I am missing?

Not everybody in the market talks to everyone else--the market is vast. This company might be dealing with counterparties that major companies don't want to deal with (size, credit risk, etc.). Or, they are providing better terms than a major would. Or have better relationships with their customers, offer better service, someone at the company they sell to used to work for ADM and got fired and won't do business with them--all sorts of reasons that a major doesn't have all the business in the world.

As far as their trading strategy, if you're buying basis you typically aren't pricing with the seller until shipment (practice of the trade/trade rules gives the buyer the option to price the contract up to date of shipment). So if they're selling flat price and then hedging, they're just going to do a vs. cash with the seller to offset the futures. They're still trading basis in that scenario, not flat price. Their "cost" will actually be lower than the grain elevator in that scenario--assuming the grain elevator has already purchased and paid for the grain and is hedged, they have more cash (interest) tied into their inventory and margin vs. the Zurich company who is likely only holding futures for a few days at most. That's not to say that the Zurich company can offer a better price, just that their cash flow situation is different--which may allow them to offer better terms, deal with more credit risk, etc. than a major would want to take on.

Jul 28, 2015

What do you think of soybeans here?

Apr 14, 2014
mrmarket:

What do you think of soybeans here?

They look like a buy to me here, but some heat in August might cause me to change that opinion.

Jul 28, 2015

How do you like your job? Would you recommend a kid out of college to go into physical trading given the opportunity? How do you think it compares to Fixed Income S&T (hours, pay, challenging)? Are there different groups in your company that focus on flow orders vs prop trading? I'm curious to hear your thoughts as I had an opportunity to do physical trading but didn't.

Apr 14, 2014
Eatmarkers:

How do you like your job? Would you recommend a kid out of college to go into physical trading given the opportunity? How do you think it compares to Fixed Income S&T (hours, pay, challenging)? Are there different groups in your company that focus on flow orders vs prop trading? I'm curious to hear your thoughts as I had an opportunity to do physical trading but didn't.

I love my job. I get to do some pretty amazing things every day and I still have moments of reflection where I can't believe some of the things I've been able to do in this business.

I do recommend this job out of college, but not for everyone. You have to have a certain personality, mindset, capacity to learn, patience level, and drive to be successful. And there aren't huge opportunities for most college graduates--you have to really pay your dues in this business. We run internship programs and I'm always amazed at how different things are for new hires out of that program after a year or two vs. what they thought they knew on day 1.

The different groups in my company focus on different products. It's hard to make a comparison to FI or other financial markets. "Prop" vs. "flow" really doesn't apply. Most pure trading companies are taking prop positions or even just back-to-backing transactions to provide some liquidity. Companies that own physical assets tend to do both, buying for their own accounts and leveraging their market positions into successful trading books through information flow and arbitrage opportunities. Especially for the majors or grain elevators, there's much more to the game than just buying and selling grain.

As far as the hours go, when you start, it really depends on where you are at. If you are working as a merchandiser at a country elevator, you're probably 8-5 most of the time, with extended hours during harvest. If you're on a central floor, you are probably putting longer hours in just because there is more work to do on a consistent basis. When you get further along in your career, your hours depend on what markets you are in. I do quite a bit of international business, which means I usually put a few hours in during the early morning and late night to stay on top of things in addition to my normal day. If you're just slinging some hulls and meal from a plant, you don't have to worry about that, but you'll still take calls about trucks not getting loaded at midnight or on the weekends.

Jul 7, 2014

"And there aren't huge opportunities for most college graduates--you have to really pay your dues in this business." could you please expand on this? e.g. how many years in the industry before one can expect to become a trader? what ARE the opportunities for grads? what exactly does "paying your dues" mean? etc etc. thanks

Apr 14, 2014

Thank you for the input. Your experience sounds amazing.

What are the main cities in the U.S./Europe to work in the agribusiness industry ?

Apr 14, 2014
tonixity:

Thank you for the input. Your experience sounds amazing.

What are the main cities in the U.S./Europe to work in the agribusiness industry ?

US: Minneapolis, Chicago, Omaha, Overland Park. Quite a few in the Pacific Northwest, a bunch in the Connecticut/Upstate New York area. Central Valley in CA.
Europe: Rotterdam, Madrid, Geneva. There are more, these are the ones I deal with on a regular basis.

Really though, there are opportunities and offices all over the place in both countries. If they grow grain, there are elevators there. If they process grain, there are mills there. Harder to find a place that doesn't have an ag opportunity vs. naming all the locations ag opportunities exist.

    • 1
Apr 14, 2014

Thanks for the answer.

I'm currently in North Carolina and there are a few ag trading shops but it's pretty hard to find an internship/entry level job here. I speak Spanish and French fluently, do you know if this is highly valued by recruiters ? I'm wondering if I should go back to Europe to find something.

Apr 14, 2014
tonixity:

Thanks for the answer.

I'm currently in North Carolina and there are a few ag trading shops but it's pretty hard to find an internship/entry level job here. I speak Spanish and French fluently, do you know if this is highly valued by recruiters ? I'm wondering if I should go back to Europe to find something.

Multiple languages aren't a huge asset in entry-level (though with Spanish, you have more opportunities because you can operate in South America). They are an asset further down the road, which can help you get the entry level job.

In North Carolina, Perdue and Murphy Brown are two options worth looking at.

Aug 13, 2015

Thanks BOTT for your continued contributions to this thread, I monitor it every week for new posts . . .

Regarding your comments on LANGUAGES, would you happen to know if any substantial trading happens from Miami offices, either in Spanish or Portuguese? I'm interested in learning whether there are Miami - based opportunities for traders facing customers in Latin America, specifically Brazil . . . I wondered if you might have any insight or know of anyone who might add insight on whether Miami is a market that offers any opportunity to entry - level applicants . . . thanks again for your contributions to this discussion.

    • 1
Sep 25, 2015

Thanks for posting Bott1702. Highly appreciated.

Do you expect any reverse of the trend and in opposite to present situation, more agriculture trades to be accomplished with real delivery?

Are there any products which could combine the real physical market and the futures one?

Apr 14, 2014
chaves17:

Thanks for posting Bott1702. Highly appreciated.

Do you expect any reverse of the trend and in opposite to present situation, more agriculture trades to be accomplished with real delivery?

Are there any products which could combine the real physical market and the futures one?

Are you talking about physicals being delivered against futures? With the board down and a huge harvest coming in, I would expect that deliverable houses will take more receipts in this year just due to the storage situation and lack of demand.

Not sure what you're asking with your second question. The futures market and the cash market are already tied together.

Sep 25, 2015

Really appreciate this BOTT1702,

I'm currently a student actively looking for internship opportunities in the ag feild. I live in Massachusetts, but would be willing to go where ever an opportunity arises. If you don't mind, could you list a few ag shops that do have internship programs, for the most part all I can find are graduate opportunities.

Thanks

Apr 14, 2014
thatsthewayshegoes:

Really appreciate this BOTT1702,

I'm currently a student actively looking for internship opportunities in the ag feild. I live in Massachusetts, but would be willing to go where ever an opportunity arises. If you don't mind, could you list a few ag shops that do have internship programs, for the most part all I can find are graduate opportunities.

Thanks

All of the majors and many semi-majors have internship programs for undergrads. Cargill, CHS, ADM, Bunge, Dreyfus, Scoular, Lansing, Andersons...there really are too many to list. Even major elevators hire summer interns. There is a very good chance you will have to relocate for one of these programs.

Oct 13, 2015

Hi there. I am a junior agribusiness student. I want to ask that if I am planning to engage in agricultural commodity trading, is it participating in CFA or FRM exam will be better for my career path? I want to start as a trading assistant, is it qualified as a agribusiness graduate rather than a finance or business graduate? In short, can agribusiness background+CFA or FRM (it depends) get a ticket to agricultural commodity trading industry for me? My ultimate( so far) goal is working for hedge fund in the long run, can I come to there from agricultural commodity trading? And which certification( CFA or FRM) will fit my ambition? Thank you so much! Looking for your reply.

Jul 23, 2014

I don't think the CFA would be worth the effort, don't know enough about the FRM. Nothing trumps experience in the commodities world and I would think an agribusiness degree would be enough to get your foot in the door somewhere.

Oct 13, 2015

Thank you so much for giving me your comment. It helps. Thank you!

Apr 14, 2014
Logos1104:

Hi there. I am a junior agribusiness student. I want to ask that if I am planning to engage in agricultural commodity trading, is it participating in CFA or FRM exam will be better for my career path? I want to start as a trading assistant, is it qualified as a agribusiness graduate rather than a finance or business graduate? In short, can agribusiness background+CFA or FRM (it depends) get a ticket to agricultural commodity trading industry for me? My ultimate( so far) goal is working for hedge fund in the long run, can I come to there from agricultural commodity trading? And which certification( CFA or FRM) will fit my ambition? Thank you so much! Looking for your reply.

  1. You don't need a CFA or a FRM to get into ag trading.
  2. You don't want to start as a trading assistant, this role rarely leads to trading opportunities. You want to start on a junior merchandiser/trader/procurement track. These roles are readily available at ABCD companies, mid-size firms, and even some smaller companies. If you are getting an agribusiness degree you are likely at a school that most of these companies recruit from, so make sure you take advantage of those opportunities.
  3. The hedge funds that I see hiring from ags and softs are looking for traders with experience in the cash markets who can trade physicals (either for delivery or paper) and futures. Whether or not they want these people to get a CFA after they are hired, I don't know, but a CFA/FRM is not a requirement for what they are hiring for. If you want to move from physicals to a hedge fund, just focus on being an outstanding trader at a known firm.
Oct 13, 2015

Really appreciate your time, you are such a good man!!! your words lighten me up. Thanks so much!!!

And I got another question... How should prepare for a junior trader position, I mean what should I learn (knowledge or various skills) to make myself competitive or outstanding to engage in this professor. Thanks a lot.

Oct 14, 2015

Just started on a grad scheme at an ABCD, really good info here. Cheers.

Oct 21, 2015

Great set of information here, thanks for providing the insight into your industry. I'm currently transitioning from a background in business development and logistics into commodities trading and I'm interviewing between lumber and agribusiness. I would love your opinion on an opportunity I'm pursuing since I don't think I could get an objective answer about from them. The agribusiness shop I'm interviewing with deals in cereal, oilseeds, legumes, milk powder, fish and animal proteins, provides value adding through processing assets, and increasingly deals in organic products. I have a few questions.

1) They are an independent shop that does not deal in large bulk export parcels but sell more to distributors. Will the scale of this business preclude me from ever transitioning into a larger-scale, more international trading role with a larger company's trading desk? Or are there fundamental similarities between these worlds? For context, I worked as a shipping agent for Agrocorp, Glencore, and Viterra (before they were acquired), and I'm just wondering if I'm going to nullify a book of contacts' potential by scaling down in terms of my markets.

2) Given the diversity of their business, do you think it is possible to work myself into a niche market that would keep me tied to them? I'm not looking to get established and then cut and run for the next opportunity, but the pragmatist in me wants to ensure I'm not backed into a corner.

Thanks in advance and apologies if any of my rhetoric is vague or wrong, I'm just getting into this world.

Apr 14, 2014
12PNW:

Great set of information here, thanks for providing the insight into your industry. I'm currently transitioning from a background in business development and logistics into commodities trading and I'm interviewing between lumber and agribusiness. I would love your opinion on an opportunity I'm pursuing since I don't think I could get an objective answer about from them. The agribusiness shop I'm interviewing with deals in cereal, oilseeds, legumes, milk powder, fish and animal proteins, provides value adding through processing assets, and increasingly deals in organic products. I have a few questions.

1) They are an independent shop that does not deal in large bulk export parcels but sell more to distributors. Will the scale of this business preclude me from ever transitioning into a larger-scale, more international trading role with a larger company's trading desk? Or are there fundamental similarities between these worlds? For context, I worked as a shipping agent for Agrocorp, Glencore, and Viterra (before they were acquired), and I'm just wondering if I'm going to nullify a book of contacts' potential by scaling down in terms of my markets.

2) Given the diversity of their business, do you think it is possible to work myself into a niche market that would keep me tied to them? I'm not looking to get established and then cut and run for the next opportunity, but the pragmatist in me wants to ensure I'm not backed into a corner.

Thanks in advance and apologies if any of my rhetoric is vague or wrong, I'm just getting into this world.

  1. You can move back and forth between small and large companies as long as you have the proper background, skills, and experience that are of value to a larger company. The skill set is fundamentally the same across the industry, but your experience might not be. For example, if you've only ever shipped product by truck, you aren't going to get hired to trade bulk vessels at a larger company. You need to have transferable experience for the area you want to move into. If your experience is a shipping agent gives you the relative experience needed to understand the terms and customs of moving bulk vessels of grain, then the door will always be open for you to move to that type of a role. Something else to consider is that size of company does not always correlate to size of opportunity; you don't need to have an international trading role at an ABCD firm to be considered successful in this industry. There are plenty of ways to get there from a comp and career satisfaction standpoint.
  2. Yes, you could develop into a niche market with them, which is not a bad thing. Some niche markets do disappear suddenly, but generally the markets you are describing have been around for a long time. Some have undergone consolidation but that doesn't mean that there is a lack of opportunity. Again, the skill set is transferable across different markets--you just might be limited to markets that trade similarly to the niche market you are already in.
Oct 21, 2015

Thanks for elaborating, this is great context. Much appreciated.

Nov 25, 2015

Out of curiosity, what does initial compensation look like for someone coming into a junior merchandiser program as an undergrad at an ABCD company? And how does it change over time?

Asking as an older MBA student who's interested in trading and has an opportunity to start off in a jr merchandising program.

    • 1
Feb 11, 2016

I've spent the last 11+ years as a grain trader with various companies across the U.S. (half the time in the Midwest balance on West Coast) and would like to give a little bit of a run down from my experience. What kind of people do companies hire as traders? They need to be Driven, Impatient, quick to the point, able to Multitask with ease, Energetic, Workaholics & most importantly People persons. This is not and never will be a role for quant-traders or introverted people.

Within the Grain Industry you will run across two types of traders, Grain Merchants (Traders), who trade basis & hedge pretty much all products on 1:1 ratio and then there are Feed Traders who trade by-products and are flat price traders, and might hedge a % of their deck against corn or like commodity. Of all the 10s of millions of physical bushels of corn I have traded in my life, I've never once looked at a chart and used it to determine if I should buy or sell a position. My decision to buy and sell a position comes strictly because I spend hours on end every day talking to farmers, terminals, processors, feed lots, other elevators, etc and gathering information on who might be long vs who might be short. If you don't like the telephone this is definitely not a job for you, your going to spend 6+ hours a day on it. Traders have to be naturally driven otherwise you won't last long, no one wants to sit there and harp on you to make more outbound phone calls. For those thinking about Wall St vs Physical Commodity, you can think of a Grain/Feed Trader more along the lines of a sales trader role vs. a algo-trader. We can make money on basis trades, freight spreads, futures spreads, grade discounts, etc. It's all about working a deal and convincing the person on the other of the phone that they want to make the deal.

You also need to be a trustworthy person, because pretty much all is done by verbal commitment, some days it might be better to get burned on a trade then burn a bridge with a customer. If people don't trust you they won't trade with you and there is little you can do to change that. (Watch the Movie: Margin Call, notice how they pay each trader almost $3 million bucks apiece to dump a rotten position. Why? Because the likelihood of those traders ever being trusted again is slim to none.)

As far as area goes, seasoned Grain Traders tend to be from Ag backgrounds. A lot of us came from small family farms that just weren't viable to produce a full-time income but yet we didn't want to leave Agricultural. With grain you will probably wind up interacting with farmers at some point and while they are great people they are very opinionated and most have no use for "outsiders" (ie city people), you'd better be prepared to tell a farmer your background and experience because this is not a 9 to 5 job, where your personal life and company life are separate. During harvest expect to work 7 days a week straight, 12 to 15 hours per day until it's over.

Feed Traders tend to interact more with processors, brokers and dairies so the Ag background is of less importance. As such several of the Feed Traders I know, have little to no Ag backgound and work more along the lines of Mon - Fri 8 to 5.

But make no mistake in either position, you better always have a cell phone and email at hand, including vacations because this job is pretty much 365. I've been on vacation in remote countries and still are working the phones, course it all depends on the size of your company. There are over 8,000 grain elevators in the US, over half are owned by the majors, ABCG (Gavilon is much bigger in US trade now than Dreyfus), leaving about 4,000 other grain companies made up of Privates (Family or Personally Owned) and Farmer Owned Co-Ops. Don't kid yourself about Co-Ops either, most of the one's still left standing are simply a Co-Op in name and tax breaks but are ran like any other for-profit business.

Would I choose to be a grain trader all over again? You bet, in a New York second. Why? When you start out you are going to "pay your dues", sorry there just isn't a magical road right to the top in this business, plus no respects you if you haven't had work your way up. The only thing I have yet to trade is Vessels, but between Truck, Rail and Barge, I'd choose Truck trading every single time, the railroad sucks to deal with and barges only go one way. A lot of it is your personality. Rail and Barge traders tend to be corp office environments and have a lot more oversight since you are dealing with a lot more $$, translation more red tape.

Of course this all varies by company, but having worked for one of the majors and traded a lot with another I find the environment is way to confined (they spend way too much time worried about what time you show up to work, how long you stay, how many useless meetings they generate today, etc, when they should just worry about how much cash you make.) With smaller shops however you have to spend more time managing your position based not only on the market but also on cash flow as they won't have access to multi-billion dollar lines of credit that the big boys have. However at smaller grain companies you will most likely be in charge of your entire hedge book and basis position, whereas the larger firms tend to have different guys trading paper vs physicals.

As far as pay goes a good trader (5+ years) should be making well over $100k+ a year, usually around $150k to $175k though I worked with a couple of guys who made $500k, but this is not consistent as each year is different (also the top earners tend to stay for a long time, so if you are a junior trader and your boss is middle age probably best to find another shop after you get experience). If you are looking to be making $200k a year by the time your 25, best buy a lottery ticket instead. Usually you will be living in the country or smaller metro area so it goes a lot further then the big city. Start out pay for a trainee right now is around $40k to $45k, most likely you will need to switch companies a few time to get better salaries as the Ag industry still is behind in modern employee retention programs, it is still a very much top down environment in terms of pay.

An in terms of education, no one really cares. I got a BS in Ag Econ from a Big 10 school but no one gives a crap, it's usually who do you know and how successful has your trading deck been. Some of the best traders I know never even went to college. An education from Harvard doesn't mean crap if you are not able to talk to people and handle the environment of Ag, and remember Ag is often overlooked but the aside from water is the most important thing for human existence. Smaller companies tend to be a lot more loyal to their employees then the majors but also have fewer career paths, but they can expose you to a lot more of the environment then majors can that might lock you into just focusing on one commodity in one region.

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Feb 11, 2016

One more thing I forgot to add, if you want to work around Ag, make a ton of money and literally have zero risk, consider becoming a cash/physical broker (Not a futures broker or reseller), every pound you broker you get paid, never have to worry about a position as you won't have one.

There are always going to be times where traders need to run things through a broker and remain anonymous to prevent collapsing a market because as soon as it gets out that a major/large player is dumping a large position/short a large chunk that could send things into a tailspin so we run it through brokers whose only job is to find buyers/sellers for our product and receive a commission. Course it's supposed to remain anonymous who is on both sides until the deal is done but again this is a people business and word gets out.

I can't say for the interior but I've seen several feed brokers on the West Coast making anywhere from $250k to $1 million a year in pay and work less than 40 hours a week. It's definitely a full sales position, but for some entrepreneurial spirited individuals it's a great path with a easier path to entry. But like everything in this business it's all dependent on your drive and personality.

In case your wondering why doesn't everyone jump on this money train, remember this, trading is more about skill/feeling/raw emotions and how you handle yourself when your in a position that is going against you, with your bank line almost tapped and your boss is breathing down your neck and wanting you to take a haircut but you know that the pipeline is almost dry, basis is feeling like its about to snap back and this thing is about ready to turn the corner and put you in the green. Unless you trade a book and have to defend your position you will never truly understand.

One last point, trading multiple commodities, it's not quite like you may be thinking, usually if you trade a bunch of products it's because most are small volume and highly seasonal so you need a bunch to keep you busy. Example is safflower, 100% flat price traded, no hedging involved. I trade pretty much my entire book during a few weeks in Feb/Mar and then you usually don't trade it again for the rest of the year. If you trade the hulls/meal/oil it's a different story but as far the grain goes it's a short timeframe.

    • 4
Jun 13, 2016

Hi,
You made a very interesting and informative post. Could you reveal the full picture on the supply of containers in Europe? Which ports are on reception of corn, wheat, barley? Which companies operate in Europe (except ABCD)?

Oct 14, 2015

ABCD

This company has fairly structured pay, but this is in the UK.

1st yr $40, no bonus
2nd yr $45, no bonus

qualification to junior merchant/trader

$50k, no bonus

no bonus due to poor year (i hope)

Feb 13, 2016

I'm a first year trainee at an ABCD, living in a Midwest/Southeast city in the US

Salary + signing bonus 78k
Expecting (based on what people last year got) 7k bonus, salary bump to 75k, and a second relocation bonus of 15k if I move to a different platform

    • 1
Feb 16, 2016

Hello BOTT1702,
What do you think would be the theoretic limit for a contango? What about backwardation?
Thanks.

Feb 25, 2016

Hi I have been into exports industry for more than 7years. I have also dealt with a few commodities like Sugar, Cotton & Maize. I wish to start my own commodity trading firm, may not be a big one, but what is it going to be going forward? Does the commodity companies make good profits? Is it a profitable business if I am able to raise capital? Would you have any rough no as to how much % of profit can we expect in running an Agri Commodity company? I know that my questions are too direct, but it may help alot of aspiring Entrepreneurs who wish to start their own agri trading firm.

Oct 11, 2016

Hello Bott1702, I really enjoy your posts and input. Can you explain Track Trading? I came across it recently and couldn't find any info on it. thank you in advance

Oct 16, 2016

Hi Bott1702,

I'm a recent graduate and would like to pursue a career in commodity trading. what do you think about the chances of career progression with a ABCD's regional office in a offshore country with around 20 employees?

Do you think I'll have equal chances of progression here as with starting as a graduate in a headquarter?

My boss seems promising a lot but nothing really happens and I doubt I'll be able to make it into a trading role in the end.

Would really appreciate your thought.

Nov 4, 2016

Hi Sir, I used to work as an oil operator but recently decided to make a switch the AG industry. I have questions which I would definitely appreciate if you could reply. I got an opportunity to join one of the big commodity firm as a AG trade executive. As a trade executive, would I be given exposure to do trading in the future.. and do big companies such as glencore, cargill practices job rotation, or would I be stuck doing the trade executive role for a long while.. Thanks if you could reply :(

Mar 15, 2017

Hi, I am just wondering the reputation of each company. Which company is considered to be the top firm in the grains trading. Cargill, ADM, BUNGE, Dreyfus, Glencore in order? I am an outsider and I do not know much about it, so I'd appreciate if you could let me know your idea or general perception in the industry.

Mar 15, 2017

Thank you very much for your reply. Are you talking about Glencore? I think Glencore is a great natural resources company but I am not sure how Glencore is perceived in the agricultural commodity industry. Other companies are more focused and have more impact on the agricultural sector.

Mar 15, 2017

Glencore has a relatively weak Ag presence mostly done out of their Singapore office.

Their subsid Viterra is a pretty big player in Ags but nowhere near the level of ABC.

Mar 15, 2017

Thank you very much!

I am afraid to ask a rookie's question, but how about Dreyfus? It is generally considered to be in the 4th position in the industry?

Jul 23, 2014
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