ExternshipsStudent ContributorSummer Opportunities

Taohen Zhao ’19 – Atlantic (USA) LLC (NY)

First, I want to thank Mr. Dunlop and Mr. Loughman, for giving me the chance to participate [in] this externship in Atlantic (USA) LLC, also thank all my colleagues who treated me friendly and helped me with patience. Although this externship only lasts for a week, I think it is an amazing experience.

Before the first day of my work, I realized commuting is not an easy thing for salarymen working in Manhattan. Manhattan has a sky-scraping housing price, therefore, it is common for normal white-collars living in places that take an hour to reach their companies in Manhattan. For me, I need to wake at around 6:30 am and catch the 7:36 am LIRR train to Penn Station, where I will transfer to subway and head to the southern end of Manhattan. This is the only way to go to work on time.

Though it’s not easy to follow this schedule, after spending the first day with my colleagues, I think it is totally worthy.

My work began with coffee. The business model here is buying coffee from farmers, grading those coffees and selling them to different buyers base on coffee’s grades. Farmers will send pre-shipment samples for us to determine the quality of coffees, then it is the job of the coffee lab to grade those coffees by cupping, which can display coffee’s character distinctively. As a coffee enthusiast, the requirement for precision in coffee brewing is not a strange thing to me, however, the attention to details in coffee cuppings, such as controlling water temperature, still impressed me.

Those careful steps in grading all serve one purpose- carrying out a profitable trade. Things are more complex when it comes to trading desks. Since commodity market has a high volatility, people are vulnerable to price risk, traders have to buy/sell futures when they buy/sell physical coffee to hedge the risk. However, price risk is just a part of the risk in coffee trading, risk also presents in the contract itself. Details in contracts also matter, basically every trade of coffee is based on the terms and restriction of a large association of coffee industry, minimizing the risk and possibility of dispute. Traders need to be very familiar with those terms and their code names that appear in formal contract to sign contracts smoothly without mistakes. In a word, being a coffee trader means you need to be very familiar with not just coffee itself, but also clients, contracts, and futures market.

After my time with the coffee department, I went to Cocoa department. Cocoa trading is similar to coffee trading, both involve grading and doing futures. However, there is a few difference between coffee and cocoa. After harvested, cocoa beans will go through a series of process and turn into cocoa butter and cocoa powder. Since cocoa butter is largely applied by many industries, traders also need to deal with it. In terms of grading, there is no standard test of flavor like cupping for cocoa beans, traders grade cocoa beans only base on physical defections and sell them to different buyers according to their grades. We also need to grade cocoa butter, moreover, we need to create blends according to their flavor profiles to satisfy clients’ needs.

I spent my last day with CSCC department, which stands for Coffee, Sugar, Cocoa and Cotton. Sounds a little bit weird, right? Actually, it focuses on designing financial derivatives that based on options of a wide range of agricultural products, which are sold to clients as solutions of risk-management. Things are complicated when involving serious finance stuff, but…I managed to get a big picture of CSCC’s business.

Besides working, having lunch with my colleagues and having chats are also enjoyable, I got to hear some interesting stuff and useful experience. It’s nice to have those friendly people around.

I really enjoy my time there, it was very productive and I learned much more than I expected from a 5-day externship. It was a great introduction to commodity trading and I will keep studying more about it.