From building cities to putting dinner on the table, commodities help power our lives. Commodities vary greatly—agricultural commodities, which feed us (corn, wheat, livestock, and coffee), energy, which heats our homes and provides transportation (crude oil, renewable electricity, and natural gas) and metals/minerals that are critical to the building of our cities and supporting technologies (iron ore, copper, and lithium).
To a certain degree, commodities are fungible, meaning one unit is exactly like every other unit. An ounce of gold mined and processed in Australia has the same characteristics and price as an ounce from the United States.
The J.P. Morgan Center for Commodities (JPMCC) is unique in that it addresses the broad commodity sector. CU Denver realizes the crucial role commodities play in our world, which is why a range of academic and research opportunities are offered.
Commodity Trading Careers
Traders on commodity exchanges can generally be categorized as hedgers and speculators. Hedgers may be individuals employed by commodity-producing firms that are seeking to manage their price risks. An example would include a soybean farmer from Minnesota who plants a crop in April and may want to lock in the price they will receive at harvest time in October.
Speculators participate in commodity trading exclusively to profit from their personal view of where prices may be in the future. These traders never set out to take or make delivery of any commodity. Most futures markets are incredibly liquid and vary day-to-day, which can be enticing for short-term, or intraday, trading.
…On the exchanges, you have the interplay of producers seeking to hedge their price exposure, and speculators that are just looking to profit from their own view of where future prices will be at.”
—Thomas Brady, PhD
While commodity trading is certainly high risk/high reward, it can be an incredibly lucrative career. Nationally, the median salary for commodity traders is $98,030. The wage range can swing quite wildly, with the lowest 10 percent of traders earning less than $37,970 and the highest 10 percent earning more than $205,440. Within Colorado, the salary range sits between $65,370 and $72,950. It is important to keep in mind that commodity traders can earn drastically more through commissions. For example, at Glencore which is headquartered in Switzerland, the average U.S.-based commodity trader earns around $257,000.
Commodities at CU Denver
Established in 2012, the J.P. Morgan Center for Commodities (JPMCC) at CU Denver focuses on producing commodities research and providing educational programs on a variety of commodities topics. Commodities markets, regulation, trading, financial fundamentals, investing, risk management, and ethics are all covered at the JPMCC.
Knowledge of commodity markets is absolutely critical to how we understand the world and global economy, allowing us to make more informed business decisions about the world.”
—Thomas Brady, PhD
As the first institution of its kind, the JJPMCC is a place for students, faculty, and industry leaders to engage with issues in the energy, mining, and agriculture sectors. Thomas Brady, PhD, is the executive director of the JPMCC. Through his leadership, the JPMCC aims to become a collaboration point between business and academia across wide-ranging commodities sectors.
Students at CU Denver who are considering a career in this industry have unique access to several commodity segments. Situated in one of the most resource-rich parts of the U.S., CU Denver has unparalleled access to commodity markets and industry leaders. CU Denver offers undergraduate commodities classes, a graduate specialization for MS Finance & Risk Management and MBA students, and a graduate commodities certificate for those looking for a non-degree option to jumpstart their career.
Current courses include Foundations of Commodities, Commodity Data Analysis, Commodity Trading, Commodity Supply Chain Management, and Commodity Hedging. The curriculum gives students a well-rounded understanding of the core components of commodities. Important software, trading concepts, quantitative techniques, and more will be provided to students.
Students taking commodity courses may also apply for scholarships offered by the JPMCC.
How to Invest in Commodities
Investing in commodities can take many forms including buying and selling on exchanges, such as the Chicago Mercantile Exchange (CME), the Intercontinental Exchange (ICE), or London Metal Exchange (LME). Here commodity futures and option contracts are traded via standardized volume and quality specifications. Most of these contracts are financially settled. However, investors do have the option to take possession of the underlying commodity.
In 1865 the first futures contract was standardized on the Chicago Board of Trade (now part of the CME). More recently, commodity-based Exchange Traded Funds (ETFs) have become popular as these allow retail investors to easily gain exposure to underlying commodity prices. The first commodity ETF was SPDR Gold Trust (GLD) which tracks gold prices and remains very popular.
In addition, it is possible to invest in actual physical commodities. As an example, it is possible to buy and sell physical ounces of gold or gold coins. However, for many other larger volume commodities this may prove difficult for the typical retail investor as this would require one to have proper storage facilities as well as necessary transportation. Commodity trading continues to be a key building block for many financial markets.
Dr. Thomas Brady
Thomas Brady serves as the executive director for J.P. Morgan Center for Commodities at CU Denver’s Business School. He is also a member of the J.P. Morgan Center for Commodities’ Research Council.
Thomas Brady holds a PhD in Mineral Economics with research emphases in commodity markets and a master’s degree in mathematics from the Colorado School of Mines. Prior to his role at CU Denver’s Business School, Thomas Brady served as the chief economist at Newmont Mining Corporation.
Learn more about CU Denver’s commodities education opportunities and how you can build your career in this high-demand industry today.
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