Getting into the game... (finding a commodities trading internship/job)

Hey guys, long time lurker, first time poster. I am a rising economics and political science (double major, not that it matters) senior, and I am super interested in commodities trading. Physical commodities seems particularly interesting, however, I'm still 'new' so it all seems great.

I have been looking to kind of get my foot in the door of the industry, however I am not entirely sure how coveted an Economics degree is in the finance world, much less my PoliSci double major. Does anyone have any experience with traders that come from economics backgrounds that don't have PhDs, is it common? I've interned with a private wealth management 'firm' that one of my professors is 'on the board of' or something like that. But I don't know if that experience is able to be leveraged, what do you guys think? Also, obtaining information on commodities, other than the big ones like oil, seems difficult, do any of you think you could steer me in the right direction on where to look?

I'm your run of the mill student, 3.5 GPA, staffed campaigns etc., nothing crazy. I have considered getting my MBA after graduation, to kind of hit the reset button, however, I am not a traditional student, that would make me 27 getting out of grad school, so I don't how sought after a 27 yr old without any full time experience will be.

Anyways, I appreciate your input guys. Anything helps!

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Comments (32)

Best Response
Aug 16, 2016 - 7:04pm

Trading physical is much more about understanding economics than finance. Your job is to understand supply and demand and have an opinion on the factors that will affect supply and demand.

I love trading physical because it gives me the opportunity to pay attention to geopolitics, monetary policy, trade policy, rail markets, barge markets, ocean freight, port strikes, and all the way down to weather and the fact that every Farmer Joe in Illinois refuses to load a truck of grain because it's too cold outside ( I trade agricultural products). You take all these variables and some, wrap it all into an opinion, and then trade off of it.

Remember when Russia jumped into Crimea? That affected the grain markets. Port congestion in Brazil affects the market. Inflation in Argentina all the sudden causes producers to hold onto their grain as a hedge against inflation. When oil drops and doesn't demand space on the rail, suddenly you can move grain cheaper on the BNSF. These are examples of variables that affect the market, and in my opinion a grain trader has to think more like an economist. Usually our calculus skills aren't as sharp as an economist, but you know what I mean.

Your double major could play well in an interview because you can show an interest in policy and in geopolitics. There was a guy in our office who lived in China few several years. He immersed himself in understanding Chinese culture and government goals. Whenever China blocked shipment of product or passed down a new trade policy, this dude was the guy that was asked to write briefings for the executives because he had an understanding of what the Chinese were trying to accomplish and what motivated the policy decisions.

While it would no doubt be valuable, I don't know any trader in physical with a PhD. Physical trading is all about relationships (most industries are). The best traders I know are salesmen with a massive competitive streaking and a whole lot of cunning. One trader roughly described it to me like this: "at the end of every trade, even if you skinned the other guy alive, you want him to walk away thinking he got the better deal". Traders do business with traders they like, or even more importantly, who they trust.

I can only speak to shops that trade ags, but I'd think your background is fine. Some places like Louis Dreyfus like MBA's but for the most part it's not an advantage. One company I worked for gave MBA's a token 1% salary bump for being an MBA, but in the hiring process it didn't help them any having an MBA.

As far as the other information on commodities, what are you looking for? Books?

I'd be curious to know what other guys in the industry think.

Aug 17, 2016 - 7:49am

Couldn't have said it better mySelf. I work in commodities, but as an analyst. I do this shit every day of the week. I trade my own portfolio using futures based on my view. Wasn't aware that the grains were effected by Crimea....interesting. I mostly focus on crude and gold, also copper and nickel - but tough to trade nickel (at least from what I've seen).

Sep 2, 2016 - 10:00am

This is a great post, I also work in Ags on an ABCD trading grad programme.

Firstly be sure to look at all the options, O&G is the 'cool' area to be in, but you have softs, ags, o&g, power, metals. The thing I like the most is the uncertainty in supply, as mentioned above, within Ags - Crimea had a HUGE (-ve) effect on my year, weather provides constant volatility, the FX markets (Brexit, Rousseff Impeachment) too, farmer psychology and physical storage constraints all play a big part in decision making.

It's worth noting there is a big sales aspect to a physical trading role, you need to know your customers, and be likable. In turn you will exchange and extract information. I spend a lot of time on the phone to customers, and attend dinners/visit customers fairly regularly. Some of these markets are very opaque and you need that information to succeed.

As for education, a few places like a masters student. Most are happy with Bachelors. Very few MBA's apart from those that have moved to manage large numbers of people, maybe those managing the trading of a region etc. Econ is important, it's basic supply and demand, so don't worry about that - one of the most intersting things I found out was how the value of USD/BRL skews Brazilian production toward/away from raw sugar(export)/ethanol(domestic) markets - old school econ. We have Econ/Agro Econ, Engineers, Scientists from UK targets, UK non-targets, Ivies etc, it's a diverse environment.

Ags opportunities are quite abundant at the moment, O&G less so. But physical experience is physical experience to an extent, the mechanics of trading a crush spread are similar to a crack spread.

Any Q's, fire away.

  • 2
Sep 3, 2016 - 1:11pm

You guys are incredibly helpful. I appreciate it tons. Yeah, I've noticed o&g is kind of the 'sexy' place to be right now. And ags seem awesome to me. What truly brings me to physical trading is the fact that it is still relationship based. I love working with a team and working with people. I'd fancy myself a people person, so when I looked into physical more, and saw that the person to person relationship still exists somewhere in trading, I was sold. I love how intricate ags is, everything down to the smallest details matter. I worked as an inbound/outbound manager at a coffee warehouse for a semester, so I'm definitely interested in that product but want to research others more to really nail down my interest. But I've found it difficult to find a lot of info on that market aside from the corruption issues going on in Brazil and how that may effect their coffee supply.

P.S. Vietnamese coffee is disgusting, never drink it if you can get away with it. You'd be surprised by the stuff we've found in the bags of coffee they sent us.

I'm going to apply for some merchandising trainee programs within the next few months, I have to take two summer classes in 'summer one' until I'll have my diploma in hand so I don't want to jump the gun and get dinged because I can't start when they need me to. I'm hoping that Im willing to live pretty much anywhere helps. I'm going to apply for jobs in Brazil/Singapore etc.. Hoping I may have an upper hand in that not a lot of recent grads are looking to jump right into a different culture right out of college.

Let me know what you think about I guess my 'path' for the next few months. Sorry for how choppy this is, written on an iPad.

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Oct 24, 2016 - 7:20am


Hate to hijack this post but your insight on commodities trading especially Ags is too informative for me to ignore, Apologies to Tandem21.
I work in a prop shop mainly in Ags trading-Futures, My location is so far from any Financial centre that at times most posts here I don't relate to. I am from Africa, born and bred, never been to EU or America but I trade Soybeans, Soymeal, Soy oil, Soycrush and Rapeseed(EU). My knowledge base is pretty good given I relate with all you have mentioned above, Chinese demand, S.A weather, Transportation issues on the Mississippi river, Basis changes, NOPA crushing etc. This opportunity has been very exciting and at the same time very limiting. My research has always been online, Reuters and a few premium subscription from Ags companies in the Midwest. The questions I would want to ask is how a person like me, very competitive in this Ag market but located at a dark corner can get opportunities in the ABCD or Ag funds in the west. More importantly how does trading physical commodities differ with Futures/options, besides the obvious structural difference. Thanks

To Tandem21
To be Honest, Our company doesn't care about your undergrad degree, where you studied or if you have an MBA from an Ivy League, if you are analytical, great in math and work hard.
Economics is a subject topic that is extremely important. As commodities is USD dominated trade, any thing, Geo-political, macro etc that affects a country, say elections in Argentina and currency policies there, or the strengthening of the USD vs world currencies.


Aug 16, 2016 - 9:44pm

There is literally a million threads on how to break in the physicals on this forum (I know cause I read them all ;) ). I agree with CaughtShort. I also happen to have a econ degree and worked in physicals ( energy & mostly swaps atm ). Best way to break in: internship/coop on a major oil company/power producer(power shops tend to like econ degrees)/ags company. Work hard and absorb everything like a sponge & show you have passion.

Aug 16, 2016 - 10:29pm

Thanks for the input guys. The only reason I asked about the PhD is because I have been told by a few people that Econ is only useful if you have a PhD, which is why I was considering the MBA. But by all means if I don't need the MBA, and I'm not even considering the PhD. I'd rather just step right onto a desk as an assistant. Also, caughtshort, I meant like news on how grain markets are doing etc. Caught you are a wealth of information man, would you mind me PMing for additional info?

Natty, it's refreshing to see someone with an Econ degree doing what I'm interested it. What kind of school did you go to if you don't mind me asking, target, ivy? Geographically, I'm a bit limited, not much in terms of energy here, and I would imagine the closer to Texas/Midwest the better chances with big energy. I go to a small private college simply based on where I was when I needed to go back to school, which had rolling admission. Any info on non-target, non-ivy guys working in the industry? I don't imagine this industry benign dominated by Ivy guys like IB is, but I'm more than willing to be wrong. Sorry to keep pestering you guys with questions, but it helps a ton.

Aug 17, 2016 - 12:52am

non-target, non ivy here. Would have helped tons if I was target. For ex. if you want to work in Energy apply to any internship you can find in Chicago(BP), Houston, or really anywhere. Then move. Usually for interns a phone interview will usually suffice.

Aug 18, 2016 - 12:17pm

You guys are awesome. Natty, again asking about your education and feel free to not divulge anything you deem too personal. But, was you Economics program catered towards agriculture? My school, a small private university, has catered ours toward public policy, as we have a sort of bridge program with a public policy PhD program. I saw North Dakota State has a masters in Ag Economics and thought something like this may help a little, they actually have a mock 'trade floor' with Bloomberg terminals and teach you to trade off of live market data etc... They say something like 30-40% of those students go into farming or ranching, and I figured if that is the case you must obtain a decent amount of knowledge in one industry if they are going off and actually applying to their businesses.

Caught, whats your .02 on this? I feel that one year of time for a masters in Ag Economics seem too bad looking at the opportunity cost. How valued would you imagine something like this would be, from a school thats not really a target?

Aug 18, 2016 - 5:25pm

I really don't think a masters in ag econ is entirely valuable if you are wanting to trade. If you want to trade physical you just need to get into the industry and learn it from the bottom up. If you want to get into policy at some point, then maybe there is some value there. when I am looking to hire someone, I would show little preference to someone with a masters in ag econ. I would much prefer a candidate with a masters in shipping and logistics actually. but even still, physical traders don't need additional degrees.

Only experience will teach you how to keep emotions and anxiety in check. Only experience will teach you how to make a guy who is screaming at you because he thinks you are screwing him over, that you are on his side. Experience will teach you how to talk without giving information, all the while you are pumping your competitor for market info.

Also, if you get too specialized with degrees then you may be limiting your opportunities. A good trader can trade anything. I knew a soybean trader who used to trade crude. While I think Ags currently provide the best opportunities to trade, you may want to trade metals, or oil, or freight one day. My advice is to just hop into the industry and rack up experience. There are a ton of opportunities right now, and experience is the most valuable asset to a physical trader.

I get excited talking about the industry and would love to help you get started however I can.

Aug 21, 2016 - 4:48am

is it alright to start off in the risk management dept of a trading house? any chances of moving into the trading team?

i had an interview with an oil trading firm and apparently their risk management dept is in charge of paper trading, the "real traders" are purely in physical trades

Sep 2, 2016 - 12:02pm

I can't speak with any authority about oil trading. In the grain world the risk management group simply hedges. you buy 5,000 bu. of physical corn, and the risk managers (or hedge desk) sells 5,000 bu. of corn on the board. Physical traders make money on basis (basis is the difference between the price on the board, and the cash price). Hedgers are typically not going to be taking and long or short positions. You will often see the physical trader take a position on the board though. typically they only take on spread risk though.

but yeah, I'd think starting in risk management is a great place to start. you will have a great opportunity to learn spreads and learn the industry.

Sep 3, 2016 - 11:23am

I'm in metals and the advice here is pretty applicable across the board.

As far as schooling goes, you really don't need more. I'm at a huge shop in the US and there are maybe two of us on our entire team with an advanced degree (and this is for a very liquid, competitive commodity).

If you have specific commodities in mind, let me know, I can see if I can suggest some good reading material.

One tough thing about commodities is that outside of having connections, it is very, very tough to break in. Ags might have the lowest barrier to entry in the US but you're going to have to be willing work in the middle of nowhere. Check out the ABCD's websites (in particular Cargill) for merchandiser positions.

If you really do have to go to school, get a masters in agecon (agribusiness) or something similar at Minnesota, Illinois, Indiana, Iowa, Kansas, Nebraska, Wisconsin, Iowa State or K-State. That's the heart of US grain country and the ABCD look at those schools.

Sep 7, 2016 - 2:14pm

I've found it pretty tough to break in to be honest. I have some good connections in the oil and distillates sector, but most have been unable to offer me a starting role as they've been making cuts across the board. I already work on a derivs mm and trading desk but this doesn't seem to be enough either.

I'm London based but willing to move where necessary. Energy (oil/gas/power) and Ags interest me. Anyone got any tips for places to look at or roles to consider as a step in (scheduling?)?


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