The purpose of this research report is to present an evaluation of advisory service pricing performance in 1996 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 1996. It is important to recognize that the performance results in this report address only the pricing, or return, element of risk management.
The total number of “advisory programs” evaluated is 26 for corn, and 24 for soybeans. The term “advisory program” is used because several advisory services have more than one distinct marketing program. A directory of the advisory services included in the study can be found at the Agricultural Market Advisory Service (AgMAS) Project website (http://www.aces.uiuc.edu/~agmas/).
In order to evaluate the returns to the marketing advice produced by the services, the AgMAS Project purchases a subscription to each of the services included in the study. The information is received electronically via DTN. Staff members of the AgMAS Project read the information provided by each advisory service on a daily basis.
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: 1) the marketing window for the 1996 crops is September 1, 1995 – August 31 1997, 2) cash prices and yields refer to a Central Illinois producer, and 3) all storage is assumed to occur off-farm at commercial sites.
The average net advisory price across all 26 corn programs is $2.63 per bushel. The range of net advisory prices for corn is quite large, with a minimum of $2.08 per bushel and a maximum of $3.12 per bushel. The average net advisory price across all 24soybean programs is $7.27 per bushel. As with corn, the range of net advisory prices for soybeans is substantial, with a minimum of $6.80 per bushel and a maximum of $7.80 per bushel. Of the marketing programs for corn, five achieve a net price that is within (plus or minus) 10 cents of the harvest cash price of $2.81 per bushel. Two of the advisory programs achieve a net price more than 10 cents higher than the harvest price, while 19programs achieve a net price that is more than 10 cents per bushel below the harvest price. For soybeans, only one of the advisory programs is within (plus or minus) 10 cents per bushel of the harvest cash price of $6.95 per bushel. However, 21 of the 24 programs achieve a net price that is more than 10 cents per bushel above the harvest price, with only two services more than 10 cents per bushel below the harvest price.