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Research Reports


Report 2001-02: The Role of Market Advisory Services in Crop Marketing and Risk Management: A Preliminary Report of Survey Results

March, 2001                                                                                                                

Joost M.E. Pennings, Darrel L. Good, Scott H. Irwin and Jennifer K. Gomez*

Copyright 2001 by Joost M.E. Pennings, Darrel Good, Scott H. Irwin and Jennifer K. Gomez. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.

            Agricultural producers continue to identify price and income risk as one of their greatest management challenges.  Using a survey of midwestern grain producers, Patrick and Ullerich (1996) report that price variability is the highest rated source of risk by crop producers. Coble, Patrick, Knight and Baquet (1999) survey producers in Indiana, Mississippi, Nebraska and Texas and find that crop price variability, by a wide margin, is rated as having the most potential to affect farm income.  Norvell and Lattz (1999) survey a random sample of Illinois producers and show that price and income risk management rank second (following computer education and training) among ten business categories in which producers identify needs for additional consulting services.  The desire for greater assistance with price and income risk management is not limited to large farms, as the proportion of producers expressing this preference actually is highest for those operating medium-sized Illinois farms (500-999 acres). 

            Producers have a variety of price and income risk management tools at their disposal.  These include numerous public and private sources of market information; futures and options contracts; an increasing number of yield and revenue insurance instruments and a new generation of cash indexing contracts. While producers value and use these tools, they place an even higher value on market advisory services as a source of price risk management information and advice. In a rating of seventeen risk management information sources, Patrick and Ullerich (1996) report that the rank of market advisors and computerized information services is surpassed only by farm records.  Schroeder, Parcell, Kastens and Dhuyvetter (1998), find that a sample of Kansas producers rank market advisory services as the number one source of information for developing price expectations. Norvell and Lattz (1999) find that twenty-one percent of Illinois respondents currently use marketing consultants, and that such consultants tie for first (with accountants), in a list of seven, as likely to be most important to their business in the future.  Among mid-sized producers, marketing consultants are ranked first as likely to be important in the future. 

            In September 1994, the Agricultural Market Advisory Service (AgMAS) Project was initiated, with the goal of providing objective and comprehensive evaluations of market advisory services for crop producers.  Since its inception, the AgMAS project has been collecting real-time pricing recommendations each crop year for about twenty-five market advisory services.  Martines-Filho, Good and Irwin (2000) report pricing performance results for corn and soybeans for the 1995 through 1999 crop years.  Martines-Filho, Good and Irwin (2001) report results for wheat over the same crop years.  The results of this research indicate a modest ability for advisory services to outperform the soybean market, less ability to outperform the corn market, and significant under-performance in the wheat market. In addition, there is little evidence that pricing performance is predictable from year-to-year and services that do outperform the average benchmark over time tend to exhibit more risk than the benchmark price.

            AgMAS Project research to date has investigated the performance of only one, admittedly important, service provided by market advisors. In addition to providing subscribers with specific marketing recommendations, the services provide other "products" to their subscribers.  These products include market-related data, such as USDA reports; market commentary, including interpretation of market related data; price analysis and outlook; and general marketing strategy.

            It is not known how subscribers make use of the various products provided by market advisory services.  It is possible that some subscribers implement the specific pricing recommendations of the advisory service, paying little attention to the commentary or analysis.  Others may use the pricing recommendations of the services to help time pricing decisions, but do not implement specific recommendations.  Still others may formulate their own marketing strategies, but make use of the market data, commentary, and analysis provided by advisory services to implement those strategies.  It is also not known how subscribers combine price risk management with production risk management.

            The purpose of this report is to provide a preliminary summary of the results of a survey designed to help answer the questions about subscriber use of market advisory services.  Importantly, this research is a cooperative partnership between the University of Illinois and the Data Transmission Network. The survey participants are commercial producers of major grain, oilseed and fiber crops, representing important agricultural areas of the US.  The survey has three broad objectives, including 1) how US producers perceive the riskiness of various aspects of farming; 2) how US producers manage farm business risk, and 3) how US producers select and use market advisory services,

           A mail survey was sent to a sample of 3,990 farmers in January 2000.  The sample was drawn from those producers who were current subscribers to Data Transmission Network (DTN), a satellite information delivery service.  Approximately 3,000 of those who received the survey were also current subscribers to one or more of ten selected DTN “premium services”.  The list of ten premium services represented the agricultural market advisory services most frequently subscribed to by DTN customers.  These premium services included Ag Resource, Ag Line by Doane, Agri-Visor, Allendale, Brock and Associates, CommStock Investments, Freese-Notis, Harris-Elliot, Pro Farmer and Stewart Peterson.  Approximately 1,000 survey recipients were not current subscribers to any of DTN’s premium services although some subscribed to other advisory services. The survey forms for “subscribers” and “non-subscribers” are included in Appendices A and B, respectively, at the end of this report.

        The survey was sent to producers in the Midwest, Great Plains and Southeast on January 21, 2000, with postcard reminders sent two weeks later, and a second mailing of the survey sent to non-respondents two weeks after that.  A total of 1,399 completed surveys were returned, for a 35 percent response rate.[2]  The response rate was almost identical for those currently subscribing to a premium service and for those not subscribing to a premium service.  The response rate was not significantly different by region of the country.

        Some demographic information – size of farm, age of operation, crops grown, and livestock produced – is available for each of the recipients of the survey.  Based on this information, there is no significant difference between respondents and non-respondents in terms of the type of crops produced (corn, soybeans, wheat, grain sorghum, cotton, or rice).  There is a significant difference between respondents and non-respondents in terms of average farm size and age of the operator.  Respondents operate an average of 2,000 acres and non- respondents operate an average of 1,500 acres.  The average age of respondents is 35, compared to the average of 45 for non-respondents.

        The following tables summarize the responses to the survey.  The responses of current subscribers to a DTN premium service are compared to non-subscribers where appropriate.  Tables 1 through 4 reflect the use of some risk management tools by the respondents.  Tables 5 through 12 summarize responses to questions about risk perception and business management practices.  Tables 13 through 26 summarize responses relative to source of market information and, for current premium service subscribers, how they value and use market advisory services.  Tables 27 and 28 reflect attitudes of those not currently subscribing to a DTN premium service about market advisory services and satellite delivery systems.  Tables 29 and 31 report the probabilities of respondents using market advisory services under various circumstances.  Table 30 reports perceptions of respondents about the expense of market advisory services and Table 32 reflects the percentage of respondents who currently hire someone to market any or all of their crops.

        The results presented here are summary in nature and are not accompanied by any detailed analysis.  That analysis is being conducted and will be reported in subsequent reports.


Coble, K.H., G.F. Patrick, T.O. Knight, and A.E. Baquet. “Crop Producer Risk Management Survey:  A Preliminary Summary of Selected Data.”  Information Report 99-001, Department of Agricultural Economics, Mississippi State University, September 1999.

Martines-Filho, J., D.L. Good and S.H. Irwin. “1999 Pricing Performance of Market Advisory Services for Wheat.”  AgMAS Project Research Report 2001-03, April 2001 (forthcoming).

Martines-Filho, J., D.L. Good and S.H. Irwin. “1999 Pricing Performance of Market Advisory Services for Corn and Soybeans.”  AgMAS Project Research Report 2000-04, December 2000.

Norvell, J. M.  and D. H.  Lattz.  “Value-Added Crops, GPS Technology and Consultant Survey: Summary of a 1998 Survey to Illinois Farmers.”  Working Paper, College of Agricultural, Consumer, and Environmental Sciences, University of Illinois, July 1999.

Patrick, G.F. and S. Ullerich.  "Information Sources and Risk Attitudes of Large-Scale Farmers, Farm Managers, and Agricultural Bankers."  Agribusiness 12(1996):461-471.

Pennings, J.M.E., S.H. Irwin and D.L. Good. “Surveying Farmers: A Case Study.” Review of Agricultural Economics 23(2001): forthcoming.

Schroeder, T. C., J. L.  Parcell, T. Kastens, and K. C.  Dhuyvetter.  “Perceptions of   Marketing  Strategies: Producers Versus Extension Economists.”  Journal of Agricultural and   Resource   Economics 23(1):279-293, 1998.

[1] Joost M.E. Pennings is a Visiting Scholar at the University of Illinois at Urbana-Champaign and a Professor in Marketing at Wageningen Agricultural University in the Netherlands. Scott H. Irwin and Darrel L. Good are Professors in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. Jennifer K. Gomez is a Research Assistant for the AgMAS Project in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. The co-operation and assistance of the Data Transmission Network in the research is gratefully acknowledged.  Funding for this research was provided by the Risk Management Agency, US Department of Agriculture and Illinois Council on Food and Agricultural Research.

[2] Complete details on the process of designing and conducting the survey are found in Pennings, Irwin and Good (2001).

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