Style and Performance of Agricultural Market Advisory Services

This paper describes the degree of marketing activeness of market advisory programs for corn and soybeans, and analyzes the relationship between activeness degree and pricing performance. The data set employed consists of advisory programs tracked by the AgMAS Project at the University of Illinois between 1995 and 2001. Cluster analysis was conducted to group the programs according to their degree of activeness. Panel data regression models were estimated to evaluate the relationship between activeness degree and pricing performance. In the corn market, point estimates indicate a positive effect of the degree of activeness on pricing performance, but this effect is of small magnitude and statistically insignificant. For soybeans,there is a stronger positive relationship between activeness degree and performance, with an estimated effect of activeness on performance larger in magnitude and statistically significant. This positive relationship suggests that active marketing programs are based on superior information and/or analytical skills.Agribusiness, Marketing,

Costos Ambientales y Eficiencia Productiva en la Producción Agraria del Partido de Pergamino

Mediante un modelo de frontera de producción estocástica se analizó el nivel de eficiencia técnica para la producción de soja, maíz y trigo en empresas agropecuarias del partido de Pergamino, Buenos Aires, Argentina. El costo asociado a tres indicadores ambientales: balances de nutrientes, balance de materia orgánica y erosión hídrica, se consideró como parte de los insumos de producción. En promedio, la soja 1ra es el cultivo con costo ambiental más elevado, con un costo ambiental 53u $s /ha mayor que en la secuencia trigo/soja y 76 u$s /ha mayor que en maíz. Se estimó un nivel de eficiencia promedio del 85%. Si bien este valor implica la posibilidad de aumentar un 15% la producción para un mismo nivel de insumos, es un valor elevado si se lo compara con mediciones realizadas en otros sistemas agrícolas extensivos. Aunque un alto nivel de eficiencia es consistente con un buen uso de los recursos, los resultados sugieren que es posible reducir los costos ambientales de los sistemas de producción mediante cambios en la combinación de cultivos. En la actualidad existe una fuerte predominancia del cultivo de soja en toda la región agrícola de Argentina. Una mayor superficie de cultivos con menores costos ambientales podría conseguirse mediante la implementación de políticas que fomenten estas producciones.A stochastic frontier model is employed to analyze technical efficiency for soybeans, corn and wheat production in commercial farms in Pergamino, Buenos Aires, Argentina. The cost associated with three environmental indicators: nutrients balances, organic carbon balance and water erosion, is modeled as an input for efficiency estimation. On average, growing soybeans has an environmental cost 53 u $s /ha higher than growing the double crop wheat/soybeans and 76 u$s /ha higher than growing maize. Estimated average efficiency for agricultural production is 85%. This value indicates the possibility of increasing production by 15% while keeping the inputs level constant. This efficiency level is high compared to efficiency estimates for extensive agricultural systems reported by other authors. While a high efficiency level is consistent in a good use of available resources, results suggest the possibility of reducing environmental costs through changes in land allocation Currently, land share for soybeans is the highest of all crops in the main agricultural region. A larger share of crops with lower environmental costs could be achieved with policies that provide incentives for increasing the planting area for these crops

PORTFOLIOS OF AGRICULTURAL MARKET ADVISORY SERVICES: HOW MUCH DIVERSIFICATION IS ENOUGH?

Agricultural market advisory services offer specific advice to farmers on how to market their commodities. Farmers can subscribe to one or more of these services and follow their advice as a way of managing price risk. According to portfolio theory, a combination of these services may have risk/return benefits compared to individual services. This report analyzes the potential risk reduction gains from naïve diversification among market advisory services for corn and soybeans. Results show that increasing the number of (equal-weighting) services reduces portfolio expected risk, but the marginal decrease in risk from adding a new service decreases rapidly with portfolio size. The risk reduction benefits of naïve diversification among advisory services is relatively small compared to the results obtained in previous studies for stock portfolios, and this is mainly because advisory prices, on average, are highly correlated. A one service portfolio has only a 20%, 16% and 32% higher expected standard deviation than the minimum risk naïve portfolio for corn, soybeans and 50/50 revenue, respectively. Most risk reduction benefits are achieved with small portfolios. For instance, a four service portfolio has only 5%, 4% and 9% higher expected standard deviation than the minimum risk naïve portfolio for corn, soybeans and 50/50 revenue, respectively. Based on these results, there does not appear to be strong justification for farmers adopting portfolios with a large number of advisory services. Farmers may well choose portfolios with as few as two or three programs, since the relatively high total subscription costs associated with larger portfolios can be avoided while obtaining most of the benefits from diversification.Marketing,

Advisory Service Marketing Profiles for Corn in 2001

Agricultural Finance,

Advisory Service Marketing Profiles for Soybeans over 2002-2004

This report presents marketing profiles and loan deficiency payment/marketing loan gain profiles for the advisory services followed by the AgMAS Project for the 2002, 2003 and 2004 soybean crops. Marketing profiles are constructed by plotting the cumulative net amount priced under each program’s set of recommendations throughout the crop year. Loan deficiency payment/marketing loan gain (LDP/MLG) profiles are constructed by plotting the cumulative percentage of the crop on which the LDP/MLG was claimed during the crop year. Marketing profiles provide information to evaluate the style of advisory services in several ways. The percentage of crop priced is a measure of within-crop year price risk. The higher the proportion of a crop priced, the lower the sensitivity of the farmer’s position value to crop price changes. For example, when 100% of the crop is priced there is no price sensitivity, which means that changes in price do not affect the value of the farmer’s position. On the other hand, when the amount priced is 0%, the value of the farmer’s position will vary in the same proportion as the change in price. Marketing profiles, therefore, allow investigating the evolution of price sensitivity under each service’s set of recommendations along the marketing window. Marketing profiles also provide other useful information. The number of steps in the profile lines and the location of these steps in the marketing window provide information about timing, frequency and size of recommended transactions. It is also possible to determine from the marketing profile figures how intensely a program uses options markets, since when options positions are open the profile line is irregular. In the same way, LDP/MLG profiles provide information about the size and timing of LDP/MLG claims.Agricultural Finance,

Advisory Service Marketing Profiles for Corn over 2002-2004

This report presents marketing profiles and loan deficiency payment/marketing loan gain profiles for the advisory services followed by the AgMAS Project for the 2002, 2003 and 2004 corn crops. Marketing profiles are constructed by plotting the cumulative net amount priced under each program’s set of recommendations throughout the crop year. Loan deficiency payment/marketing loan gain (LDP/MLG) profiles are constructed by plotting the cumulative percentage of the crop on which the LDP/MLG was claimed during the crop year. Marketing profiles provide information to evaluate the style of advisory services in several ways. The percentage of crop priced is a measure of within-crop year price risk. The higher the proportion of a crop priced, the lower the sensitivity of the farmer’s position value to crop price changes. For example, when 100% of the crop is priced there is no price sensitivity, which means that changes in price do not affect the value of the farmer’s position. On the other hand, when the amount priced is 0%, the value of the farmer’s position will vary in the same proportion as the change in price. Marketing profiles, therefore, allow investigating the evolution of price sensitivity under each service’s set of recommendations along the marketing window. Marketing profiles also provide other useful information. The number of steps in the profile lines and the location of these steps in the marketing window provide information about timing, frequency and size of recommended transactions. It is also possible to determine from the marketing profile figures how intensely a program uses options markets, since when options positions are open the profile line is irregular. In the same way, LDP/MLG profiles provide information about the size and timing of LDP/MLG claims.Agricultural Finance,

ADVISORY SERVICE MARKETING PROFILES FOR SOYBEANS OVER 1995-2000

This report presents marketing profiles and loan deficiency payment/marketing loan gain profiles for the advisory services followed by the AgMAS Project for the 1995 through 2000 soybean crops. Marketing profiles are constructed by plotting the cumulative net amount priced under each program's set of recommendations throughout a crop year. Loan deficiency payment/marketing loan gain (LDP/MLG) profiles are constructed by plotting the cumulative percentage of the crop on which the LDP/MLG was claimed during the crop year. Marketing profiles provide information to evaluate the style of advisory services in several ways. The percentage of crop priced is a measure of within-crop year price risk. The higher the proportion of a crop priced, the lower the sensitivity of the farmer's position value to crop price changes. For example, when 100% of the crop is priced there is no price sensitivity, which means that changes in price do not affect the value of the farmer's position. On the other hand, when the amount priced is 0%, the value of the farmer's position will vary in the same proportion as the change in price. Marketing profiles, therefore, allow investigating the evolution of price sensitivity under each service's set of recommendations along the marketing window. Marketing profiles also provide other useful information. The number of steps in the profile lines and the location of these steps in the marketing window provide information about timing, frequency and size of recommended transactions. It is also possible to determine from the marketing profile figures how intensely a program uses options markets, since when options positions are open the profile line is irregular. In the same way, LDP/MLG profiles provide information about the size and timing of LDP/MLG claims.Marketing,

ADVISORY SERVICE MARKETING PROFILES FOR CORN OVER 1995-2000

This report presents marketing profiles and loan deficiency payment/marketing loan gain profiles for the advisory services followed by the AgMAS Project for the 1995 through 2000 corn crops. Marketing profiles are constructed by plotting the cumulative net amount priced under each program's set of recommendations throughout a crop year. Loan deficiency payment/marketing loan gain (LDP/MLG) profiles are constructed by plotting the cumulative percentage of the crop on which the LDP/MLG was claimed during the crop year. Marketing profiles provide information to evaluate the style of advisory services in several ways. The percentage of crop priced is a measure of within-crop year price risk. The higher the proportion of a crop priced, the lower the sensitivity of the farmer's position value to crop price changes. For example, when 100% of the crop is priced there is no price sensitivity, which means that changes in price do not affect the value of the farmer's position. On the other hand, when the amount priced is 0%, the value of the farmer's position will vary in the same proportion as the change in price. Marketing profiles, therefore, allow investigating the evolution of price sensitivity under each service's set of recommendations along the marketing window. Marketing profiles also provide other useful information. The number of steps in the profile lines and the location of these steps in the marketing window provide information about timing, frequency and size of recommended transactions. It is also possible to determine from the marketing profile figures how intensely a program uses options markets, since when options positions are open the profile line is irregular. In the same way, LDP/MLG profiles provide information about the size and timing of LDP/MLG claims.Marketing,

Should Farmers Follow the Recommendations of Market Advisory Services? A Hierarchical Bayesian Approach to Estimation of Expected Performance

A Bayesian hierarchical approach is employed to estimate individual expected performance of agricultural market advisory services. Skeptical beliefs based on market efficiency are incorporated as prior information. For a skeptical decision maker who is willing to follow an advisory program only if it is expected to increase price received by more than 1%, one of the corn programs, most of the soybean programs, and a few wheat programs may be valuable marketing alternatives. The expectation under this model from following the single top-ranked program are price increases of 1%, 4%, and 3% for corn, soybeans, and wheat, respectively. Copyright 2010, Oxford University Press.

Should Farmers Follow the Recommendations of Market Advisory Services? A Bayesian Approach to Performance Evaluation

This paper employs a Bayesian hierarchical approach to estimate individual expected performance of market advisory programs in corn and soybeans. This estimation procedure is a conservative approach compared to traditional estimation, since it reduces estimation error in the expected gains from following top-performing advisory programs. Three versions of the model are estimated. The first combines information across the entire sample, while the second includes skeptical beliefs based on the efficient market hypothesis. The third divides programs into two groups based on the degree of activeness in marketing recommendations. Results indicate that even when skeptical beliefs are incorporated into the model a few programs in corn and several programs in soybeans appear to be better marketing alternative compared to a naïve strategy that mimics the market benchmark. More specifically, a skeptical farmer can expect to increase the price received for corn by 1% and the price received for soybeans by 5% following the single top-ranked program