The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2003

AgMAS Project Research Report No. 2005-01

147 Pages Posted: 17 Apr 2005

See all articles by Scott H. Irwin

Scott H. Irwin

University of Illinois at Urbana-Champaign

Darrel L. Good

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

João G. Martines-Filho

University of São Paulo (USP) - Department of Economics, Administration and Sociology

Lewis A. Hagedorn

J.P. Morgan Chase & Co.

Date Written: March 29, 2005

Abstract

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2003 corn and soybean crops. Market and farmer benchmarks are developed for the performance evaluations. Two market benchmarks are specified in order to test the fragility of performance results to changing benchmark assumptions. The 24-month market benchmark averages market prices for the entire 24-month marketing window. The 20-month market benchmark is computed in a similar fashion, except the first four months of the marketing window are omitted. The farmer benchmark is based upon the USDA average price received series for corn and soybeans in Illinois. The same assumptions applied to advisory program track records are used when computing the market and farmer benchmarks. Four basic indicators of performance are applied to advisory program prices and revenues over 1995-2003. Test results provide little evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. The evidence is somewhat more positive with respect to the farmer benchmark, even after taking risk into account. For example, the average advisory return relative to the farmer benchmark is $7 per acre with only a negligible increase in risk. While this return is small it nonetheless represents a non-trivial increase in net farm income per acre for grain farms in Illinois. Test results also suggest that it is difficult to usefully predict the year-to-year pricing performance of advisory programs based on past pricing performance. However, there is some evidence that performance is more predictable over longer time horizons, particularly at the extremes of performance rankings.

Keywords: Prices, corn, soybeans, advisory service, risk, performance

JEL Classification: Q11, Q13

Suggested Citation

Irwin, Scott and Good, Darrel L. and Martines-Filho, João G. and Hagedorn, Lewis A., The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2003 (March 29, 2005). AgMAS Project Research Report No. 2005-01, Available at SSRN: https://ssrn.com/abstract=695224 or http://dx.doi.org/10.2139/ssrn.695224

Scott Irwin (Contact Author)

University of Illinois at Urbana-Champaign ( email )

344 Mumford Hall
1301 W. Gregory Dr.
Urbana, IL 61801
United States
217-333-6087 (Phone)

HOME PAGE: http://https://scotthirwin.com/

Darrel L. Good

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
326 Mumford Hall, MC-710
Urbana, IL 61801
United States

João G. Martines-Filho

University of São Paulo (USP) - Department of Economics, Administration and Sociology ( email )

Av. Padua Dias, 11
Piracicaba, SP 13418-900
Brazil

Lewis A. Hagedorn

J.P. Morgan Chase & Co. ( email )

60 Wall St.
New York, NY 10260
United States

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