Weighing up physical commodity trading (agricultural) and a FICC rotation program

Hi everyone,

Senior at semi target, have been offered two roles last minute and have a about a week to decide. Both located in a large non-NYC city.

The first one is at a MM bank in their FICC S&T rotational program. I am guaranteed at least one rotation across a trading desk, but will otherwise rotate across a number of functions. It's a two year program, with four rotations.

The other job that I have been offered is at a boutique physical trader that trades agricultural products. It would be a logistics/operational role of sorts. I was told in the interview that it could certainly be used as a stepping stone to physical trading, but there are no promises. I would be sitting right next to the traders all day so Im assuming if I make a good impression over the next 12-18 months it would be up for consideration.

I have had some experience agricultural commodities, interning a few days a week at a brokerage house while in college for the past 18 months. My ideal/dream role would be a physical oil trader at one of the majors, I just don't find agricultural products overly interesting in comparison. So, if I were make it as a physical trader at the boutique, how difficult a jump would it be to move to a bigger player trading oil (or metals). There are only three traders there, so I'm worried it would be difficult to make the jump to a larger place after a few years (even if it's still trading ags).

When weighing up the two jobs, I really don't like the idea of ending up in sales at the bank, especially when I could easily end up in retail sales. I don't get a say in the rotations, and every time I asked where I would end up, I was just told that it would depend on the banks needs. However, sales sounds 100X more appealing than being stuck in logistics/operations for my career.

All else equal, when looking at day to day experiences, transferable skills and general job security, I think I would prefer to be trading physicals rather than market making.

tldr: logistics/operations at boutique physical ag trader vs MM FICC rotation? How hard is it to move from ags to oil or metals?

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Comments (22)

Apr 26, 2017 - 10:13am

I'm biased since I'm in physical metals but I would go with the ags one. FICC at a BB in NYC/London is one thing, at an MM in the Midwest sounds like it could be pretty boring (and a crapshoot given its rotational).

The transition to oil/metals is not impossible. For oil, if you guys do corn/ethanol that is a natural stepping stone. Trafi has its program for experienced traders and Louis Dreyfus I know sometimes interviews people with experience in its grad program in Europe.

I'm not suggesting transitioning is easy, but it would be a whole lot easier from the ag company imo if your dream goal really is supermajor trading.

Best Response
Apr 26, 2017 - 12:04pm

This is solid advice.

Best move from Ags to O&G is through either Corn/Ethanol or Veg Oils/Biodiesel. It is difficult though and far from guaranteed - PM me for more details on this one, as I am looking at making that transition myself.

The physical route will most likely be less well remunerated, but in my biased opinion way more fun, just be prepared to stick in logistics/ops for a couple of yrs, you may need to do the same again to break into O&G - it's a slow process and in my exp you always end up involved in ops/logistics even if you've made the jump to trading, they go hand in hand.

The S&T route will probably be better paid, in the short term almost definitely. Big questions over where you end up though, which could be a killer. Depends in a big way on who the actual bank is/how well respected they are.

  • 4
Mar 7, 2019 - 6:52am

While agreed that that is a way to transitio to energy, ags to energy is more difficult and uncommon that one might imagine. Here some thoughts.

BD/Ethanol traders are deployed by large refiners to make sure they comply with mandates but pretty much anyone in their energy desk can purchase as volumes are very small hence usually it's done by distillates team. So unless very large, refiners/traders they won't hire a dedicated ags trader who doesn't know how the distillates markets work. What I've seen is the traders hiring refiner buyers, as they tend to know the energy side and then "just" have to learn the agri side to it.

The traders, Trafi, LDC, etc do also trade veg/bd/eth but again these bd/eth desks are very volatile as industry is totally dependant on legislation - save for discretional. Some focus their efforts on discretional blending but hence totally price dependant: it only works as long as price differential in favor of veg products, when the window is over, it's over.

All in all I'd say it's a quite volatile desk to be, from what I've seen myself it's a much safer choice to go for a vegoil/oleochemical trader role or sugar desk from the start, or just energy.

EDIT: PS: Also mention that I believe that supply/ops experience is crucial in trading (obviously in physical), hence if your objective is to actually become a trader I'd probably want to recommend to go to a shop where you are exposed to the physical side to it. Banks are good to understand the hedging/paper/fin risk aspect but won't get you a job as a physical trader cause it's impossible to trade physical without the understanding of supply. Imagine how are you gonna respond to a tender if you don't know how to supply? How are you gonna make money on the physical desk without buying physical product, storing it, shipping it, controlling quality, chartering, etc.? Supply is critical, I's say if you don't like supply side physical trading is not for you anyway.

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Jul 12, 2017 - 10:52am

Starting comp at the physical trader is much lower, but enough to live a basic lifestyle I guess. While irrational to pick a job based on the starting comp, its still hard to ignore.

I was heavily leaning towards the physical trader, but I suppose I was just looking for justification from people in the industry. When asking friends and family, most have looked at me like I'm crazy for considering a job with lower pay and no brand name.

Thanks for the help guys.

Apr 26, 2017 - 8:56pm

When asking friends and family, most have looked at me like I'm crazy for considering a job with lower pay and no brand name.

Human nature - I would take the ag role without even thinking. Get a foot in the door, and work hard at the boutique. If you eventually land a trading role there great, then you can start being very active in the markets to make yourself known. If you can't land a trading role, then you can always laterally switch companies. It's much easier to switch to a larger player in a operational role than it is in trading. Trading will all depend on your volumes, and operations will be on your knowledge.

Apr 27, 2017 - 4:53am

The no name aspect needs to be carefully weighed up here on the physical side.. OP - what would your job actually entail? What sort asset footprint does this boutique have, is it purely US based or international?

Also how no-name is this place? Most ppl I know have never heard of Bunge/COFCO/Vitol/Gunvor etc, so is it the fact your family don't know who they are or would any of us working in commodities know this company?

Agreed on the point about switching ops to ops, but even if you do get to a trading role with this boutique - the move up to an ABCD (would be the more sensible route before switching to energies) is not guaranteed, as a trader at a smaller player, moving to a trading role at a bigger company before transitioning to energies would be very very difficult.

Playing devil's advocate here - I love commodities but this isn't a straightforward decision!

  • 2
Apr 28, 2017 - 9:51am

serious question for OP... is your trading firm a middle man that only does trading, or are they a direct producer? Before the Military I found myself trapped in a horrible middle man operation .
It used to be highly profitable during the early days of computers, but is now a shell of what it once was. Commodities is a relationship based business, and needless to say my firm burned a lot of bridges once it would fuck people over on 10-12 cents a gallon when the spread was far and wide. Now that spreads in ethanol are tight, and margins are down, producers and and consumers both treat you like the plague. So many bridges had been burnt down before I started, that people wouldn't even answer if I called. Some people wouldn't even allow trades through the broker with us. I found the last 6 months of my career calling the same people daily, just to make it look like I was doing something. I had a few clients that would talk on ice to smoke and joke, but they even admitted they wouldn't do a deal with us. That being said, it's pretty bad when my manager would make me show bids 2 cents below what's being seen in the broker market clear as day. Clients who would talk, kept telling me life is better on the production side. You know exactly how much inventory you have, and how many rail cars you need moved by a specific date. People who need your product will call you, and are more willing to share inside information. If you can confirm that they are a producer/ have some sort of edge no one else does I say go agro in the mid west. If not, fixed income for sure. Alternatively, you should really consider trying to get into the NGL game. The spreads on it are still huge, and not a lot of people know much about it. PM me if you want to hear more about my experience.

Apr 28, 2017 - 10:23am

GoodBread has basically told you all you need to know, awesome advice per usual.

I would go phys ags but I would also go in with the understanding that my transition to phys oil or phys gas will be very difficult if not impossible. Even if that may be too extreme, at least you won't be disappointed if that possibility became a reality in the future. Phys ags can be pretty exciting too from discussions I've had, no doubt.

Apr 28, 2017 - 1:07pm

Hey man, I'm just a wanna be phys trader, and don't graduate until December, so take all of this with a grain of salt. But a good friend of mine trades wheat and has fed me some of the info I'm about to relay to you.

I'm sure you know phys trading is relationship driven, you would be building solid relationships in your ag position, have you looked up some of the guys' backgrounds that you would be working side by side with? That may help your decision, see where they came from, schools, past jobs etc... who knows, they may know oil guys and after some time spent may be willing to help you pursue your career interests. (maybe don't be so upfront with your wanting to leave right off the bat)

Since you said you aren't entirely interested in Ag, I'm going to assume you aren't entirely invested in their products, that being said, my friend told me a solid way into trading if you don't know the product 100% up and down, left/right etc, is to know the areas that surround the product, i.e logistics. So imo this could land you an ag trading role after two/three years of work, but who knows.

One thing you might be able to leverage is a freight logistics role at a shell/bp/chevron or wherever after a few years of work. Have you thought of/looked for those kinds of options?

Everyone that has posted is infinitely more qualified on this subject than I, but hopefully you'll find your way man.

Best of luck

Jul 12, 2017 - 10:52am

I get the impression its somewhere where they're more than open to working your way up. The two younger traders there were given their trading roles after a stint in ops. I would definitely keep an eye open for roles at shell/bp etc, though I would probably attempt to make the transition to oil after I have already become a trader in ags.

I definitely wouldn't hint that I'm actually more interested in oil to them, I can't see that going down too well.

Jul 12, 2017 - 10:53am

I'm going to call up tomorrow and take the physical role. My eventual position post rotation in FICC seems a whole lot more up to chance than I'm comfortable with. The job security at S&T programs makes me very nervous as well. If I work my ass off at the physical I'm sure I can get where I want to be.

No one in my school has ever really heard of physical trading, so knowledgeable advice is hard to come by. Really appreciate everyone's help, made this decision a whole lot easier for me.

Feb 14, 2019 - 9:03pm

I was in a similar position though it was ags trading vs IB and I went with the trading role because I felt like I would thrive in a role that I could see the progression to my ultimate goal.

Mar 6, 2019 - 10:04am
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