The Pricing Performance of Market Advisory Services in Corn and Soybeans over 1995-2004

Abstract

The purpose of this research report is to evaluate the pricing performance of market advisory services for the 1995-2004 corn and soybean crops.

Five basic indicators of performance are applied to advisory program prices and revenues over 1995-2004. Results show that advisory program prices fall in the top-third of the price range relatively infrequently. There is limited evidence that advisory programs as a group outperform market benchmarks, particularly after considering risk. The evidence is somewhat more positive with respect to farmer benchmarks, even after taking risk into account. For example, the average advisory return relative to the farmer benchmarks is $8 to $12 per acre with only a marginal increase in risk. Even though this return is small and mainly from corn, it nonetheless represents a non-trivial increase in net farm income per acre for grain farms in central Illinois. Test results also suggest that it is difficult to 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: Q10, Q11, Q13