Why is commodity intelligence important for businesses?

Commodity intelligence is becoming a transformative tool for agricultural businesses. In an era where data drives decisions, businesses that harness the power of commodity intelligence platforms can thrive significantly. In this article, we’ll explore why commodity intelligence is vital for businesses and how it can transform operations, strategy, and bottom lines.

1. Huge Time-Saver

Commodity intelligence platforms are a huge time-saver for business dealing with agri-commodities. They address several critical challenges faced by commodity traders, buyers, and sellers, such as the lack of accurate and independent information, outdated and disparate systems, and the need for real-time, value-added insights. One of the significant advantages is the aggregation of data from numerous sources, such as USDA, MPOB, EU Commission, MAPA, and large cooperations like FrieslandCampina, Arla, and Agrimer. These entities provide prices and market analyses/reports on a monthly, weekly, or even daily basis. Commodity intelligence platforms consolidate all this data into a single platform, eliminating the need to contact suppliers, aggregate prices, analyze data, monitor news sites, and sift through PDFs manually.

For instance, Vesper’s commodity intelligence platform allows users to easily compare prices from different sources, across various countries. With Vesper’s price comparison tool, users can compare proprietary prices with public prices, futures, and open-source prices all in one place. This comprehensive approach not only saves time but also enhances the ability to make informed decisions based on a wide range of data inputs.

Below, an example of Vesper’s price comparison widget in which Butter prices from the Netherlands, Germany and the UK are compared.

2. Understanding Market Dynamics

With the large volume of data points, connecting the dots can be challenging for agricultural businesses. Factors such as weather patterns, changing supply and demand dynamics, production trends, and consumption trends all contribute to market volatility. Commodity intelligence platforms simplify this complexity by combining the data for you and presenting it in a user-friendly manner to help you better understand market dynamics. In addition to providing ready-made market analyses for each commodity product, these platforms often offer an easy-to-grasp overview of bearish and bullish drivers affecting market prices. They can explain why price or production levels have been changing and offer a suggested outlook of what might happen in the future.

Take Vesper’s platform, for instance. The provided image illustrates how a commodity intelligence platform can help understand global market dynamics for palm oil. In this example, you get a concise explanation of why the current market sentiment is bearish, what drives the current price level to be normal, why demand is bearish, why supply is weak, why stock levels are normal, and why futures are bearish.

3. Develop an Accurate Market Outlook

Procurement managers face the challenge of navigating unpredictable markets, often struggling to make timely and informed decisions due to the complexity and volume of data. Limited in-house data science resources further complicate their efforts to accurately forecast market movements. Commodity intelligence platforms are essential for companies embracing digital transformation. They provide comprehensive data analytics, AI-generated forecasts, and real-time insights to support data-driven decision-making. This is particularly valuable in the FMCG sector, where margins are tight and quick reactions to market changes provide a significant competitive advantage.

Vesper’s AI-generated price forecasts offer a robust solution by predicting future prices, stock levels, and production ranges. Using advanced machine learning, these forecasts provide a clear understanding of potential market shifts, enabling informed and timely trading decisions. Vesper’s AI analyses millions of global data points, offering broader and more accurate predictions than human analysts. The models are continuously updated with new data, ensuring they remain current and adaptable.

In the example below, Vesper’s forecast for SMP Europe indicates an upcoming price increase, prompting buyers to secure volumes in advance or preventing sellers from selling all their inventory as their margins might increase in a few months. This forecast demonstrates that in the past month, our AI-powered forecast for SMP achieved a 95% accuracy rate, significantly outperforming traditional human forecasting capabilities due to its superior processing power.

4. Real-Time Decision Making

In today’s fast-paced business environment, making timely decisions is crucial, and commodity intelligence platforms are designed to facilitate this need by providing real-time data. These platforms continuously scrape data from various sources, ensuring that the information is always up-to-date. This capability allows businesses to respond swiftly to market changes, adjust their strategies, and make informed decisions quickly. Additionally, the inclusion of frequently updated proprietary data, such as price indexes, ensures that the insights are more accurate and relevant than those from open-source or official prices.

Furthermore, these platforms offer accessibility from anywhere and on multiple devices, allowing users to make critical decisions on the go. Whether accessing the platform via a computer, tablet, or smartphone, users can stay informed and react promptly to any market developments. This flexibility ensures that decision-makers are always equipped with the latest data, enhancing their ability to negotiate effectively and seize market opportunities as they arise.

5. Improve negotiation power

Commodity intelligence platforms significantly enhance negotiation power through multiple factors, with benchmarking against proprietary price benchmarks being the most pivotal. These benchmarks provide unparalleled market transparency by offering a clear, accurate view of current market prices. Unlike generic benchmarks, proprietary ones reflect real-time market conditions, ensuring higher accuracy and reliability. This level of detail allows businesses to make well-informed decisions about pricing, purchasing, and selling strategies. Consequently, companies can negotiate better contract terms and maintain a competitive edge, leading to improved financial outcomes and optimised procurement strategies.

For instance, Vesper’s proprietary Vesper Price Index (VPI) is an exclusive pricing index, updated 4 to 6 times daily, unlike other indexes like those from USDA or MPOB. For example, the Forward Vesper Price Index for crude soybean oil averages inputs from multiple brokers. The widget shows the latest prices for the next 12 to 15 months, refreshed up to 6 times per day:

Conclusion

In conclusion, commodity intelligence is an indispensable tool for businesses in the agricultural sector, offering significant advantages that can drive operational efficiency, strategic planning, and profitability. By streamlining data aggregation, offering deep insights into market dynamics, and enabling accurate forecasting, these platforms empower businesses to navigate the complexities of global markets with confidence. The ability to make real-time decisions and enhance negotiation power further strengthens a company’s competitive position. As the business landscape continues to evolve, the integration of commodity intelligence will likely become even more critical for those seeking to maintain and expand their market presence. Embracing this technology not only saves time and resources but also positions businesses to thrive in a rapidly changing world.