How to Start a Physical Commodity Trading Business
January 10, 2026 | 7 min read
Commodity trading intermediaries—brokers, agents, and facilitators—play a vital role connecting buyers and sellers in energy and agricultural markets. This guide covers how to establish yourself as a successful intermediary, from building networks to earning commissions without holding inventory.
Understanding the Intermediary Business Model
Unlike physical traders who buy and hold commodities, intermediaries facilitate transactions between parties. You earn commissions by connecting buyers with sellers, providing market intelligence, and ensuring smooth deal execution—without capital-intensive inventory positions.
Key Intermediary Types:
Commodity Brokers: Match buyers and sellers, earn commission on completed deals (typically 0.5-2% of transaction value)
Trading Agents: Represent specific buyers or sellers on retainer or commission basis
Deal Facilitators: Source opportunities, coordinate logistics, manage documentation for fee or percentage
Market Consultants: Provide market intelligence and connections for monthly retainers or success fees
Capital Requirements: Much Lower Than Physical Trading
The beauty of the intermediary model is dramatically lower capital needs compared to physical trading:
Startup Capital: $10,000-$50,000 for business registration, website, marketing materials, travel to meet clients, and 6-12 months operating expenses before steady commissions
No Inventory Financing: You dont buy commodities, so no need for letters of credit or trade finance
No Storage Costs: Physical logistics are handled by the principals in your deals
Your main investments are time, relationships, and reputation—not capital.
Building Your Network: The Foundation of Success
As an intermediary, your network IS your business. Success depends entirely on knowing the right buyers and sellers.
Developing Seller Relationships
Target producers, refiners, large trading houses, and commodity brokers looking to expand their buyer base. Attend industry conferences, join commodity trading associations, use LinkedIn to connect with procurement and sales managers, and visit production facilities when possible to understand their operations.Securing Buyer Relationships
Identify end-users, processors, distributors, and other trading companies seeking reliable supply. Understand their exact quality requirements and delivery preferences, offer to provide market intelligence even before you have deals, and build trust through consistent communication.
Geographic Focus
Many successful intermediaries specialize in connecting specific regions. For example, linking South American grain producers with Asian buyers, or connecting U.S. LNG exporters with European importers. Geographic specialization builds deep expertise and valuable relationships.
Choosing Your Commodity Niche
While you can theoretically broker any commodity, specialization builds credibility:
Energy Commodities: Crude oil, refined products, natural gas, LNG, coal—high transaction values mean larger commission potential but require deep technical knowledge
Agricultural Products: Grains, oilseeds, soft commodities—more accessible for beginners, frequent transactions, established trading patterns
Metals: Base metals, precious metals, steel products—technical specifications important, strong regional price differentials
Specialty Products: Niche commodities like sulfur, fertilizers, biofuels—less competition, requires specialized knowledge
Start with commodities you understand or have connections in. Your credibility depends on genuine expertise.
Commission Structures and Revenue Models
Intermediaries earn through several compensation models:
Transaction Commission: Most common—earn 0.5-2% of deal value. On a $1 million transaction, that’s $5,000-$20,000. Higher percentages for smaller deals or specialized commodities.
Per-Ton Fees: Common in bulk commodities. Example: $2-$10 per metric ton depending on commodity and services provided.
Retainer Plus Success Fee: Monthly retainer ($2,000-$10,000) for exclusive representation plus smaller commission on closed deals.
Dual Commission: In some markets, both buyer and seller pay small commissions to intermediaries (must be disclosed).
Always have clear written commission agreements signed before facilitating transactions. Specify when commission is earned—upon contract signing, upon delivery, or upon payment.
Essential Skills and Knowledge
Market Intelligence: Stay current on prices, supply-demand dynamics, geopolitical factors. Subscribe to commodity price reporting services, follow industry news daily, understand seasonal patterns.
Contract Knowledge: Understand standard commodity contracts, Incoterms, quality specifications, inspection procedures, payment terms.
Logistics Understanding: Know shipping routes, transportation costs, storage requirements, documentation needs. Help clients navigate these complexities.
Relationship Management: Your success depends on trust. Respond promptly, provide accurate information, never misrepresent situations, protect confidential information.
Negotiation Skills: Help parties reach agreement without alienating either side. Focus on win-win outcomes.
Legal and Regulatory Considerations
Business Structure: Register as LLC or corporation. Consider professional liability insurance to protect against claims from failed deals.
Broker Licenses: Some jurisdictions or commodities require broker licenses. Check local regulations and commodity exchange rules.
Compliance: Understand export controls, sanctions (OFAC), anti-money laundering requirements. Never facilitate transactions involving sanctioned parties or prohibited goods.
Contracts: Have a lawyer draft your standard brokerage agreement. Clearly define services, commission terms, confidentiality, liability limitations.
The Deal Flow Process
A typical intermediary transaction follows this pattern:
Sourcing Opportunities: Seller contacts you with available product, or buyer requests you find supply. Verify their legitimacy and financial capability.
Matching Parties: Identify potential counterparties from your network. Present opportunities without revealing sensitive details initially.
Facilitating Negotiation: Coordinate communication between parties. Help negotiate price, terms, logistics. Address concerns and find compromise.
Documentation Support: Ensure proper contracts are signed. Verify all parties understand terms. Coordinate inspection arrangements and payment mechanisms.
Follow-Through: Monitor execution to ensure smooth delivery and payment. Address any issues promptly. Collect your commission per agreement.
Avoiding Common Pitfalls
Scam Awareness: The commodity intermediary space attracts scammers. Never pay upfront fees to “sellers.” Verify companies are real. Be wary of deals that seem too good to be true.
Over-Promising: Don’t guarantee deals will close or specific prices. Your role is facilitation, not guarantee.
Side-Dealing: Never try to cut out principals and deal direct. This destroys your reputation instantly.
Confidentiality Breaches: Protect client information. Don’t share buyer lists with competitors or reveal seller identities prematurely.
Working Without Agreements: Always have signed commission agreements before introducing parties. Verbal promises are unenforceable.
Marketing Your Services
Professional Website: Showcase your expertise, commodity focus, geographic coverage, client testimonials (with permission).
LinkedIn Presence: Connect with commodity professionals. Share market insights. Position yourself as knowledgeable resource.
Industry Events: Attend conferences, trade shows, networking events. Face-to-face relationships are invaluable.
Referrals: Your best marketing is successful deals. Happy clients refer others. Build reputation for integrity and results.
Market Reports: Send regular market updates to your network. Demonstrate expertise without asking for business.
Building Long-Term Success
Specialize Deeply: Become the go-to expert in your niche. Deep knowledge attracts quality clients.
Provide Value Beyond Matching: Offer market intelligence, logistics guidance, contract advice. Be a trusted advisor.
Build Recurring Relationships: Focus on repeat business with reliable clients rather than one-off transactions.
Stay Current: Markets evolve. New players emerge. Technology changes. Continuous learning is essential.
Manage Cash Flow: Commissions can be irregular. Maintain reserves for lean periods. Diversify your client base.
First 90 Days Action Plan
Days 1-30: Register business, create website, join industry associations, identify commodity focus, start building LinkedIn network
Days 31-60: Attend industry events, reach out to potential buyers/sellers, study market dynamics, draft standard agreements, subscribe to price reporting services
Days 61-90: Present your first opportunities, facilitate initial transactions, collect feedback, refine your approach, expand network systematically
Realistic Income Expectations
Year 1 -2: Focus on building relationships and closing your first few deals. Income likely $20,000-$60,000 as you establish credibility.
Year 3-4: With established network and proven track record, $75,000-$200,000 annually is realistic for a solo intermediary.
Year 5+: Top intermediaries with specialized expertise and strong networks can earn $250,000-$1 million+ annually.
Income is highly variable and depends on deal size, frequency, and your commission rates. Some months may be lean while others are very profitable.
Conclusion
Becoming a commodity trading intermediary offers a path into commodity markets with far lower capital requirements than physical trading. Success depends on relationships, market knowledge, integrity, and persistence. Start by specializing in a commodity you understand, build genuine expertise, provide real value to both buyers and sellers, and maintain ethical standards even when deals are difficult. Your reputation is your most valuable asset—protect it fiercely.