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"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
Agricultural Market Advisory Services project, which receives
funding from the Illinois Council on Food and Agricultural Research.
Co-authors along with Good were Scott Irwin, a fellow professor in
the U of I Department of Agricultural and Consumer Economics, and
AgMAS director Joao Martines-Filho.
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 the research is 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 online 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."
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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 with 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.
[University
of Illinois press release]
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