The purpose of this research report is to present an evaluation of advisory service pricing performance for the 1997 corn and soybean crops. Specifically, the average price received by a subscriber to an advisory service is calculated for corn and soybean crops harvested in 1997. 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 23 for corn, and 21 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) with a few exceptions, the marketing window for the 1997 crops is September 1, 1996 -August 31, 1998, 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 23 corn programs is $2.32 per bushel. The range of net advisory prices for corn is substantial, with a minimum of $2.00 per bushel and a maximum of $2.74 per bushel. The average net advisory price across all 21soybean programs is $6.40 per bushel. As with corn, the range of net advisory prices for soybeans is substantial, with a minimum of $6.08 per bushel and a maximum of $6.99 per bushel.
Of the 23 marketing programs for corn, 12 achieve a net price that is within (plus or minus) 10 cents of the market benchmark price of $2.33 per bushel. Four of the advisory programs achieve a net price more than 10 cents higher than the market benchmark price, while seven programs achieve a net price that is more than 10 cents per bushel below the market benchmark price. For soybeans, seven of the advisory programs are within (plus or minus) 10 cents per bushel of the market benchmark price of $6.30 per bushel. Eight of the 21 programs achieve a net price that is more than 10 cents per bushel above the harvest price, with six services more than 10 cents per bushel below the harvest price.