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The 1995 Through 1998 Pricing Performance of Market Advisory Services for Wheat

About This Publication

The primary purpose of this research report is to present an evaluation of advisory service pricing performance for the 1995, 1996, 1997, and 1998 wheat crops. 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, World Wide Web sites or e-mail. Staff members of the AgMAS Project read the information provided by each advisory service on a daily basis. A directory of the advisory services included in the study can be found at the Agricultural Market Advisory Services (AgMAS) Project website (

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: i) with a few exceptions, the marketing window for wheat is June 1st of the year prior to harvest to May 31st of the year following harvest, ii) cash prices and yields refer to a soft red winter wheat producer in southwest Illinois, iii) all storage is assumed to occur off-farm at commercial sites, and iv) loan deficiency payment (LDP) recommendations made by advisory programs are followed wherever feasible and applicable.

The average net advisory price across all 24 wheat programs in 1995 is $3.79 per bushel, $0.18 above the market benchmark price. The range in 1995 is $3.01 to $4.71 per bushel. The average net advisory service price for 23 wheat programs in 1996 is $3.82 per bushel, $0.13 below the market benchmark. The range in 1996 is $2.74 to $4.94 per bushel. The average net advisory price for all 20 wheat programs in 1997 is $2.64 per bushel, $0.58 below the market benchmark. The range in 1997 is $1.34 to $3.90 per bushel. Finally, the average net advisory price across all 21 services in 1998 is $2.36 per bushel, $0.54 below the market benchmark. The range in 1998 is $1.34 to $3.33 per bushel.

The average revenue achieved by following the wheat programs over four years is $151 per acre, $16 less than the four-year average market benchmark revenue. The spread in advisory revenue also is noteworthy, with the difference between the bottom- and top-performing advisory programs over four years reaching nearly $40 per acre.

An advisory program’s net price or revenue received is an important indicator of performance. However, the tradeoff between pricing performance and risk is likely to be of interest to producers. Based on the data available for 1995-1998, a modestly negative tradeoff between average net advisory price and risk is found; producing higher net prices generally requires that an advisory program take on less risk, and vice versa. One advisory program in wheat outperforms the market benchmark when both price and risk are considered, while many have a lower price and higher risk. No program outperforms the benchmark based on revenue. It is important to emphasize that the pricing and risk performance results are based on only four observations. This is a small sample for estimating the true risks of market advisory programs. Hence, the return-risk results should be viewed as exploratory rather than definitive.

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