Really interesting post Il Principe, is there some good books on commercial hedging ? It's difficult to take so much criteria into account for a trading decision. You must be in this game for a long time to quickly get the whole picture out of it. I will look into it. Thanks.
A.) For your purposes, I'd look first at the CME website, plenty of educational papers about spreads If you want more depth, there are a few books on grain merchandising and I'm sure many more on cash energy. B.) It certainly is difficult to absorb, initially, and working within that cash/futs environment certainly is an advantage. When a commodity sale is made, for example, one trading decision(a short) has simultaneously been made. The next decision is the buy: should they cover now, should they wait for a break in futs or is it covered via existing inventory? Easier to manage your book when a decision on one spread leg is made for you. C.) But don't get discouraged and don't assume all the cash info in the world will make you or any producer a great spreader. Everyone's trying to call future price/spread levels, no? And sometimes shite(weather/poor quality/your ship sinks) happens; the essence of trading. D.) At the very least, give yourself a basic, top-down picture, look at it over 5yrs/10 yrs, compare it to spread levels. No need to get too deep, initially, just gives you a better understanding when analyzing spreads statistically.
OK thanks for the useful advice. I will read as much as I can on this subject. I need to understand more about basis trading.