News Article

Marketing Services Studies Released

By Aces Staff
Jul 3, 2003

July 3, 2003

URBANA—Even though agricultural marketing services do not appear to “beat the market,” studies released today by University of Illinois Extension indicate their use does provide an opportunity for corn and soybean producers to improve marketing performance.

“This is because, on average, producers appear to significantly under-perform the market,” said Darrel Good, one of the authors of the studies produced by the U of I’s AgMAS Project, which receives funding from the Illinois Council on Food and Agricultural Research (C-FAR). Scott Irwin, like Good a professor in the U of I Department of Agricultural and Consumer Economics, and AgMAS director Joao Martines-Filho, are co-authors.

For the past seven years, the AgMAS Project has completed analysis of the pricing performance of market advisory services for corn and soybeans during that period. The project is not designed as a rating service for advisory services, but is a research project designed to evaluate the ability of the advisory service industry to improve the marketing performance of producers.

The new reports contain the results for the most recent marketing year, 2001-02, and cumulative results over the seven-year period beginning with the 1995-96 marketing year.

“There were 27 advisory programs for corn and 26 programs for soybeans included for 2001-02,” said Good. “Over the seven-year history of the study, 39 different programs for corn and 38 programs for soybeans were included for at least one year.”

The reports are available on-line at: http://www.farmdoc.uiuc.edu/agmas/index.html .

“The seven-year results of the study provide limited evidence that advisory services, as a group, outperform market benchmarks, particularly after variability of performance from year to year is considered,” said Good. “In contrast, the study provides more evidence that services, as a group, outperform the farmer benchmark even after taking variability into account. Little evidence of predictability of performance was found.”

Based on assumptions that reflect yields, prices, and storage costs in central Illinois, the studies calculate the net prices received by subscribers to these services. These prices are compared to market benchmark prices and a farmer benchmark price in order to judge the performance of the services. The market benchmark prices reflect the average price offered for corn and soybeans in central Illinois and the farmer benchmark is based on the average price received by corn and soybean producers in Illinois as reported by the USDA.

“Four indicators of performance are presented,” said Good. “These include the percentage of the advisory programs that outperform and under-perform relative to the benchmark prices, the difference between the market advisory services’ average price and the benchmark prices, an examination of the variability of price performance of the services over time, and the predictability of advisory service performance based on past performance.”

Good noted that the question for producers who under-perform the market is whether they can most effectively improve performance by subscribing to advisory services or by employing more passive strategies which involve routinely spreading sales throughout the marketing year.

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