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The Pricing Performance Of Market Advisory Services In Corn And Soybeans Over 1995-2000

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  • Good, Darrel L.
  • Martines-Filho, Joao Gomes
  • Irwin, Scott H.

Abstract

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2000 corn and soybean crops. 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 a crop year runs from September before harvest through August after harvest, ii) cash prices and yields refer to a central Illinois farm, iii) storage is assumed to occur at on-farm or commercial sites, and iv) marketing loan recommendations made by advisory programs are followed wherever feasible. Based on these assumptions, the net price received by a subscriber to market advisory programs is calculated for the 1995-2000 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 1995-2000. The results provide limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. In contrast, substantial evidence exists that advisory programs as a group outperform the farmer benchmarks, even after taking risk into account. Whether the superior performance of advisory programs versus the farmer benchmark is attributed to luck or skill depends on one's theoretical perspective. Efficient market theory favors a luck interpretation, while behavioral market theory favors a skill interpretation. Regardless of the theoretical perspective, there is little evidence that advisory programs with superior performance can be usefully selected based on past performance.

Suggested Citation

  • Good, Darrel L. & Martines-Filho, Joao Gomes & Irwin, Scott H., 2002. "The Pricing Performance Of Market Advisory Services In Corn And Soybeans Over 1995-2000," AgMAS Project Research Reports 14784, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    • Handle: RePEc:ags:uiucrr:14784
    DOI: 10.22004/ag.econ.14784
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    Cited by:

    1. Cabrini, Silvina M. & Irwin, Scott H. & Good, Darrel L., 2005. "Efficient Portfolios of Market Advisory Services: An Application of Shrinkage Estimators," 2005 Annual meeting, July 24-27, Providence, RI 19469, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Cabrini, Silvina M. & Stark, Brian G. & Irwin, Scott H. & Good, Darrel L. & Martines-Filho, Joao, 2005. "Portfolios of Agricultural Market Advisory Services: How Much Diversification Is Enough?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(1), pages 101-114, April.
    3. Irwin, Scott H. & Martines-Filho, Joao Gomes & Good, Darrel L., 2003. "The Pricing Performance Of Market Advisory Services In Corn And Soybeans Over 1995-2001: A Non-Technical Summary," AgMAS Project Research Reports 14770, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    4. Pennings, Joost M.E. & Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2004. "The Impact Of Marketing Advisory Service Recommendations On Producers' Marketing Decisions," 2004 Annual meeting, August 1-4, Denver, CO 20389, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Pennings, Joost M.E. & Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2004. "The Impact of Market Advisory Service Recommendations on Producers' Marketing Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-20, August.
    6. Kidd, Willis V. & Brorsen, B. Wade, 2002. "Can Structural Change Explain Changes In Returns To Technical Analysis?," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19066, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. Joao Martines-Filho, 2006. "The Performance of Agricultural Market Advisory Services in Corn and Soybeans," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 162-181.
    8. Irwin, Scott H. & Martines-Filho, Joao Gomes & Good, Darrel L., 2003. "The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2001," AgMAS Project Research Reports 37510, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    9. Kidd, Willis V. & Brorsen, B. Wade, 2002. "Can Structural Change Explain The Decrease In Returns To Technical Analysis?," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19059, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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