By Taylor Hudson

When I was learning about commodities, my professors would talk about a farmer’s “basis book.” It must have been easy to visualize, because the concept has stuck with me for over 20 years. They’d describe visiting with a corn, soybean, or hog producer and watching as they opened their “basis book” in order to evaluate an upcoming marketing or hedging decision. The book apparently contained lots of historical treasures capable of guiding important decisions, if one paid attention to their story when woven together.  I went to school when Excel was a luxury, so we are talking about spiral “basis books” complete with wrinkled pages, coffee stains, and pencil smudge marks.  Ah, the good old days!

So what was in these hallowed books? Data.  And not just any data.  Time series data.  Observations taken at regular intervals and recorded for use at some later time.  These farmers’ carefully recorded data points were prices from up and down the producer’s supply chain each and every day. Dollars per bushel, cents per ton. Prices at the grain elevators, at the livestock auction, of the futures contracts. Separate and distinct products, locations, and times. Each and every day. In my mind’s eye, I could see my grandfather writing the weather in his diary after his “basis book” entry for the day. Strongly influenced by their story, I came to learn that successful commodity market participation requires access to historical data.

You can imagine my shock when I arrived in the “real world” and met one participant after another without the obligatory “basis book” on their business. Even today, with widespread access to automation and data service technologies, I still meet commodity market participants without any access to historical data for their given supply chain. Along with that lack of data comes a lack of analysis and decision-making power.  

Here at Synergy Commodity, we teach people how to buy better.  And what is Lesson 2 of the buy better journey? (Read Lesson 1 here.) Get yourself a spiral notebook or better yet a spreadsheet. Each day, record the prices in your unique supply chain. The more data the better — there is never enough.