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Modeling Farmers' Use of Market Advisory Services

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  • Pennings, Joost M.E.
  • Irwin, Scott H.
  • Good, Darrel L.

Abstract

In an effort to improve marketing of their products, many farmers use market advisory services (MAS). To date, there is only fragmented anecdotal information about how farmers actually use the recommendations of market advisory services in their marketing plans, and how they choose among these services. Based on the literature on consulting services usage, a conceptual framework is developed in which perceived performance of the MAS regarding realized crop price and risk reduction, and the match between the MAS and the farmer's marketing philosophy drive MAS usage. To account for possible heterogeneity among farmers regarding to the use of MAS, we introduce a mixture-modeling framework that is able to identify unobserved heterogeneity. With this modeling framework we are able to simultaneously investigate the relationship between market advisory usage and the key components of our conceptual model for each unobservable segment in the population. A large scale interview of US farmers that contained several experiments revealed that farmers' use of MAS not only depends on the outcome of their services (price and risk reduction performance) but also on the way these services are delivered, i.e., the match of marketing philosophy between farmers and MAS. The influence of the factors in our conceptual model did not influenced farmers MAS usage equally across the whole sample. Using the generalized mixture model framework we found 5 segments that differed regarding the influence that these factors have on farmers MAS usage. The heterogeneity of the farmers appeared to be unobserved, in that it could not be traced back to observable variables such as age and region. It is the decision-making process itself, as reflected in our conceptual model, that caused the heterogeneity.

Suggested Citation

  • Pennings, Joost M.E. & Irwin, Scott H. & Good, Darrel L., 2001. "Modeling Farmers' Use of Market Advisory Services," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18950, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  • Handle: RePEc:ags:ncrone:18950
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    Cited by:

    1. Silvina M. Cabrini & Scott H. Irwin & Darrel L. Good, 2007. "Style and Performance of Agricultural Market Advisory Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 607-623.
    2. Todd H. Kuethe & Mitch Morehart, 2012. "The profit impacts of risk management tool adoption," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 104-116, May.
    3. Klumpp, Joni M. & Brorsen, B. Wade & Anderson, Kim B., 2005. "The Impact of Marketing Strategy Information on the Producer's Selling Decision," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19036, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    4. Irwin, Scott H. & Good, Darrel L. & Martines-Filho, Joao Gomes & Hagedorn, Lewis A., 2005. "The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2003: A Non-Technical Summary," AgMAS Project Research Reports 37486, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.

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    Keywords

    Marketing;

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