COMMODITIES BY: MAHA KHAN PHILLIPS
L
ast year, people in many
underdeveloped nations
“Commodities are unique in that there is not
began rioting over the costs
of food. In Mexico, the price of
one major macro economic analysis to be done,
corn bread rose by over 400%,
causing tens of thousands of
but you have to examine micro economies of
people to protest down the streets
of Mexico City. In Pakistan, cars
individual markets.” Bob Greer, PIMCO
were set alight and people killed
over wheat shortages, while in
Jakarta, 10,000 people marched
against the rising costs of analyst, looking at the markets and very much in demand going
soybeans. Oil prices meanwhile, making recommendations. “Th is forward, and despite diffi cult
continued to rocket. From requires a strong economic market conditions, it is an area
December 31, 2001 until the background. You have to where there are still opportunities
end of 2007, front-month crude understand the economics of these for new graduates.
oil prices have increased by distinct markets. Just because you According to Greer however,
almost 400%. understand the economics of the there are some areas where graduates
Many diverse factors grain markets doesn’t mean you or those with limited experience will
contributed to the steep rise of understand the economics of the fare better than others.
commodity prices, and that oil markets,” says Greer. “If you’re coming into a hedge
diversity, say experts, is an Th e second area is the actual fund or some small operation they
illustration of the depth and trading of commodity portfolios. want people with experience, but
breadth of knowledge industry “You still have to have an if it’s a larger organisation that
participants need to have before understanding of economics, but can aff ord to have a junior level
building a successful career in the you also need more of an analyst then they will take
commodities business. understanding of the way markets graduates on. Most larger
trade, and the ebb and fl ow of investment banks do have training
DIVERSE ASSETS buying pressure and selling opportunities,” he says
“Commodities are unique in that pressure, and managing your
there is not one major macro impact on the market.” Traders GLOBAL SUPPLY
economic analysis to be done, but need to be able to think quickly on A recent report by Merrill Lynch
you have to examine micro their feet, and have to have the reveals that global supply of
economies of individual markets. ability to make fast decisions. Th ey agriculture still lags, despite
Th is means that for cattle you are also have to have strong recent acreage additions. Th e
going to be studying things like the mathematical skills. fi rm attributes the supply/
inventory of cattle on feed logs Finally, there are sales roles. demand imbalance to the fact
throughout an area. But that “Th ere you need the ability to that China is not producing
doesn’t have anything to do with relate to your customers as well as enough grain and soybeans to
the amount of crude oil OPEC an understanding of the markets. keep up with internal demand,
will be producing,” explains Bob Having the CFA is perhaps better and the growing trend of grain
Greer, head of real return products suited for this area, because many and soy being used for biofuels.
at PIMCO. of the customers will have a CFA “As consumption has exceeded
In the investment banking side designation themselves and will production in recent years, global
of the business, there are three relate to it,” says Greer. grain inventories are hovering at
main areas to build a career in And though prices are starting the lowest levels in the last 30
commodities. Th e fi rst is as an to fall, commodities will still be years,” says the report.
Cg
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