Niche commodities
Adding on to that lumber post from a while back, anyone have insight into niches like physical seeds, dairy, and cattle (any other interesting physical niches?)? I'm stronger in relationships/bd type work than math/derivatives but still find commodities very interesting - a good place to be in 10 years' time? Would this route be a rich experience, even if I decide to drop out a few years in?
The organic space could be really interesting for someone with those interests. Chickpeas and things like that are a space that is growing quickly and there are no derivatives of any kind.
Fully agree with you that lentils and pulses will continue to grow in popularity. I get the feeling that it helps to be Canadian of Indian extraction, to be totally fair. The Canadians grow it and the Indians eat it.
if you got balls, you would be trading uranium
*semi-joking
Agree with Rotterdam, pulses and organics seem to be growing rapidly with no real derivatives market to speak of. Semi processed commodities like petchems, steel, etc. also have non-existent/illiquid financial markets. I am speaking from limited experience but a lot of the time since these products are less liquid (more volatile) with no futures market to hedge with you are basically gonna either close out the other side of your other position almost immediately and get a baked in margin (back to back) or you are playing around in the world of flat price risk where you can swing either direction pretty hard. That said don't sell yourself short on doing commodities with liquid futures markets. I personally did STEM in school but last year I interviewed for a power trading role which is considered a more quantitative heavy product and nobody who interviewed me had anything beyond a business/Finance/Econ degree. Likewise two? summers ago where I interned I worked with a guy who was a former broker who did CDS in the 2000's and then nat gas options. These are considered super quantitative products and the dude never even went to college, absolute legend. Imo the math is really helpful and can give you an edge sometimes but it isn't like you can't trade certain products if you don't have a PhD in physics. Ironically enough I took a role where I actually am doing more commodity analytics/quantitative work so go figure.
Water. Hydrogen. Carbon. Rare earth metals. Desalinization equipment, Chicken wings (not joking. See scandals in chicken pricing), uranium, and if you got cajones...electricity.
All of these, except the wings, will be instrumental in powering the world in the next 50 years. All will be physical, including the wings.
I'm hearing things about the Hydrogen market. How do you see that direction playing out?
Think the most interesting ones have been covered, would recommend reading about lithium as well. Another fun one that's more interesting for the historical context is potash, some junior miners now so some messing around from an equity perspective but from trading, mostly worth reading about to see how it developed as an example for other commodities
There is no real trading of potash. Nitrogen in the form of UREA/Ammonia yes, a bit of phos rock here and there but Potash is a closed shop. Really, there are what 4 exports. Every single importer is aware of them and the 4 exporters are more than aware of their position.
Maybe compound and/or compound organic ferts have a trading future.
From a ferts trader friend it seems like you make money 2 ways: Take an unhedged position and cross your fingers that the market rises before loading the cargo 2: take insane credit risk selling into sub-Saharan Africa and SE Asia.
I know of a guy who made millions marketing pumpkins for pet food.
Scrap metal. It is still very much the wild west but is fast becoming too important to be ignored by the big guys.
you see glencore being active in this?
Trafi says they are starting a green aluminum desk and Glencore says they are committed to the Paris 2020 Accords. Seems like scrap has to be part of that equation. And it seems to me like that talent will probably have to be poached.
Glencore isn't active in steel, so scrap is a bit of a stretch. There are a million respected steel trading houses.
Why are Traf(i) and Glencore the only names mentioned? Come on, give me a Merc or Gunvor, at least. I'm not asking for Olams, ED&F's, or others. Just stop it with the Glencore's and Trafis. It's so amateur.
In what ways do you think the industry is becoming too important for established shops to ignore?
When China banned imports of some of the lower grade stuff, spreads blew out (spreads below commodity grade) and a lot of subtitution happened. So a model like in steel where EAF is dominant in the US where there is a lot of scrap, is now starting to take shape in non-ferrous as well.
Agriculture, maybe Cannabis once it gets legalized and takes off?
Eh... it will never be a scarcity market once it's legal. The money is in branding, specific strains etc.. but demand is likely to be elastic for those. There will be room for wholesalers, but actually trading?
And unlike coffee which is originated very far from where it is consumed so traders get rewarded covering various risks, cannabis if it is legalized will be grown close to where it is consumed by businesses with access to capital markets (equity mkt, maybe bank debt financing?). Alot of the raison d’etre of the physical traders isn’t as much of a selling point with cannabis i would think. Supply chain is shorter and less complex unlike other commodities where you need large scale industrial assets like crushers, refinery etc
Organic is already played out. As are pulses.
Tip: look at what ingredients go into petfoods and go from there. Thats where you should focus on the ag side
Supportive for rare earth/battery metals. Arguably losing their niche status given increasing volume, but still far away from being actively traded. Fertiliser also interesting but market is active, though not transparently so.
Someone I know runs a one-man-band trading grain, and they make like 2-300k per year working 9-5, so seems like it can be a nice life
Biofuels may be? Though its covered by big players it is still as niche market.
If you want really niche, a couple days ago on reddit I found out that koi fish (yes, those fish in the pond at the sushi place) can cost up to $20K or something equally absurd as that
Sand and cement. Who would have thought?!
https://www.cnbc.com/amp/2021/03/05/sand-shortage-the-world-is-running-…
Cement has some legit players in it. Biggest would be LafargeHolcim trading.
Would say LH has decent size in Europe. It’s a competitive landscape now in global cement trading. Holcim Trading was the biggest back in the 2000s to 2010s before the merger.
Everyone would have thought that operates in physical. IMI, HC Trading, Votorancim, Spartan Hive, Cultura, Cemex Trading....who would have though of cement trading?
By the way, it is actually aggregate, clinker and slag that the "cement traders" are moving. Super low margin, but nice volumes.
Hey mate, are you based in Europe/Med region?
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