THE PRICING PERFORMANCE OF MARKET ADVISORY SERVICES IN CORN AND SOYBEANS OVER 1995-2001: A NON-TECHNICAL SUMMARY

The purpose of this research report is to summarize the pricing performance of professional market advisory services for the 1995-2001 corn and soybean crops. First, advisory programs in corn do not consistently beat market benchmarks, but they do consistently beat the farmer benchmark. Second, advisory programs in soybeans tend to beat both market and farmer benchmarks. Third, in terms of 50/50 revenue, advisory programs only marginally beat market benchmarks, but consistently beat the farmer benchmark. So, the results provide mixed performance evidence with respect to market benchmarks and consistently positive evidence with respect to the farmer benchmark. Caution should be used when considering the results, due to the relatively small sample of crop years available for analysis. In particular, the presence of sharp downward price trends in most crop years makes it difficult to determine whether the 1995-2001 sample period provides a reliable guide to future differences in pricing performance.Marketing,

THE PRICING PERFORMANCE OF MARKET ADVISORY SERVICES IN CORN AND SOYBEANS OVER 1995-2000

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2000 corn and soybean crops. Certain explicit assumptions are made to produce a consistent and comparable set of results across the different advisory programs. These assumptions are intended to accurately depict "real-world" marketing conditions. Several key assumptions are: i) with a few exceptions, the marketing window for a crop year runs from September before harvest through August after harvest, ii) cash prices and yields refer to a central Illinois farm, iii) storage is assumed to occur at on-farm or commercial sites, and iv) marketing loan recommendations made by advisory programs are followed wherever feasible. Based on these assumptions, the net price received by a subscriber to market advisory programs is calculated for the 1995-2000 corn and soybean crops. Market and farmer benchmarks are developed for the performance evaluations. Two market benchmarks are specified in order to test the fragility of performance results to changing benchmark assumptions. The 24-month market benchmark averages market prices for the entire 24-month marketing window. The 20-month market benchmark is computed in a similar fashion, except the first four months of the marketing window are omitted. The farmer benchmark is based upon the USDA average price received series for corn and soybeans in Illinois. The same assumptions applied to advisory program track records are used when computing the market and farmer benchmarks. Four basic indicators of performance are applied to advisory program prices and revenues over 1995-2000. The results provide limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. In contrast, substantial evidence exists that advisory programs as a group outperform the farmer benchmarks, even after taking risk into account. Whether the superior performance of advisory programs versus the farmer benchmark is attributed to luck or skill depends on one's theoretical perspective. Efficient market theory favors a luck interpretation, while behavioral market theory favors a skill interpretation. Regardless of the theoretical perspective, there is little evidence that advisory programs with superior performance can be usefully selected based on past performance.Marketing,

1999 PRICING PERFORMANCE OF MARKET ADVISORY SERVICES FOR CORN AND SOYBEANS

The purpose of this research report is to present an evaluation of advisory service pricing performance in the 1999 crop year for corn and soybeans. Specifically, the average price received by a subscriber to an advisory service is calculated for corn and soybean crops harvested in 1999. The average net advisory price across all 26 corn programs in 1999 is $2.02 per bushel, three cents below the market benchmark price. The range of net advisory prices for corn is substantial, with a minimum of$1.66 per bushel and a maximum of $2.49 per bushel. The average net advisory price across all 25 soybean programs in 1999 is$5.67 per bushel, seventeen cents above the market benchmark. As with corn, the range of net advisory prices for soybeans is substantial, with a minimum of $4.68 per bushel and a maximum of$7.10 per bushel. The average revenue achieved by following both the corn and soybean programs offered by an advisory service is $299 per acre,$2.00 more than market benchmark revenue for 1999. The spread in advisory revenue also is noteworthy, with the difference between the bottom- and top-performing advisory programs reaching more than $100 per acre.Marketing,

THE PERFORMANCE OF AGRICULTURAL MARKET ADVISORY SERVICES IN CORN AND SOYBEANS

The purpose of this paper is to evaluate the performance of market advisory services for the 1995-2000 corn and soybean crops. A new database from the Agricultural Market Advisory Services (AgMAS) Project is used in the evaluation. This database should not be subject to survivorship and hindsight biases. Overall, the results provide limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. In contrast, some evidence exists that advisory programs as a group outperform the farmer benchmark, even after taking risk into account. There is little evidence that advisory programs with superior performance can be usefully selected based on past performance.Crop Production/Industries,

The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2001

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2001 corn and soybean crops. The results for 1995-2000 were released in earlier AgMAS research reports, while results for the 2001 crop year are new. Certain explicit assumptions are made to produce a consistent and comparable set of results across the different advisory programs. These assumptions are intended to accurately depict “real-world” marketing conditions facing a representative central Illinois corn and soybean farmer. Several key assumptions are: i) with a few exceptions, the marketing window for a crop year runs from September before harvest through August after harvest, ii) on-farm or commercial physical storage costs, as well as interest opportunity costs, are charged to postharvest sales, iii) brokerage costs are subtracted for all futures and options transactions and iv) Commodity Credit Corporation (CCC) marketing loan recommendations made by advisory programs are followed wherever feasible. Based on these and other assumptions, the net price received by a subscriber to market advisory programs is calculated for the 1995-2001 corn and soybean crops. Market and farmer benchmarks are developed for the performance evaluations. Two market benchmarks are specified in order to test the fragility of performance results to changing benchmark assumptions. The 24-month market benchmark averages market prices for the entire 24-month marketing window. The 20-month market benchmark is computed in a similar fashion, except the first four months of the marketing window are omitted. The farmer benchmark is based upon the USDA average price received series for corn and soybeans in Illinois. The same assumptions applied to advisory program track records are used when computing the market and farmer benchmarks. Four basic indicators of performance are applied to advisory program prices and revenues over 1995-2001. The results provide limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. In contrast, more evidence exists that advisory programs as a group outperform the farmer benchmark, even after taking risk into account. Little evidence is found that advisory programs with superior performance can be usefully selected based on past performance. The results raise the intriguing possibility that even though advisory services do not appear to “beat the market,” they nonetheless provide an opportunity for farmers to improve marketing performance because farmers under-perform the market. Mirroring debates about stock investing, the relevant issue is whether farmers can most effectively improve marketing performance by pursuing “active” strategies, like those recommended by advisory services, or “passive” strategies, which involve routinely spreading sales across the marketing window.Agricultural Finance, Financial Economics,

TRACKING THE PERFORMANCE OF MARKETING PROFESSIONALS: 1995-2000 RESULTS FOR CORN AND SOYBEANS

The purpose of this research bulletin is to summarize the pricing performance of professional market advisory services for the 1995-2000 corn and soybean crops. The pricing performance results over 1995-2000 suggest several key findings. First, advisory programs in corn do not consistently beat market benchmarks, but they do consistently beat the farmer benchmark. Second, advisory programs in soybeans tend to beat both market and farmer benchmarks. Third, in terms of 50/50 revenue, advisory programs only marginally beat market benchmarks, but consistently beat the farmer benchmark. Overall, there is mixed evidence that advisory programs as a group outperform market benchmarks, while substantial evidence exists that advisory programs as a group outperform the farmer benchmarks. Caution should be used when considering the results, due to the relatively small sample of crop years available for analysis. In particular, the presence of sharp downward price trends in most crop years makes it difficult to determine whether the 1995-2000 sample provides a statistically reliable picture of future differences in pricing performance.Marketing,

EVALUATION OF MARKET ADVISORY SERVICE PERFORMANCE IN HOGS

The purpose of this paper is to investigate the pricing performance of agricultural market advisory services in hogs. Pricing recommendations are available for all quarters from the beginning of 1995 through the end of 2001. The results show that average differences between advisory programs and market benchmarks are small in nominal terms for all three benchmarks, -$0.41/bu.,$O.OO/cwt. and $-0.27/cwt. versus the cash, index and empirical benchmarks, respectively, and none of the average differences are significantly different from zero. Hence, advisory programs as a group do not outperform the market benchmarks in terms of average price. Advisory programs also do not outperform the market benchmarks in terms of average price and risk. Finally, there is little evidence that advisory programs with superior performance can be usefully selected based on past performance in the hog market.Marketing,