About AgMAS - Agricultural Market Advisory Services
Introduction
Agricultural producers continue to identify price and income risk
as one of their greatest management challenges. Using a survey of
midwestern grain producers, Patrick and Ullerich (1996) report that
price variability is the highest rated source of risk by crop producers.
Coble, Patrick, Knight and Baquet (1999) survey producers in Indiana,
Mississippi, Nebraska and Texas and find that crop price variability,
by a wide margin, is rated as having the most potential to affect
farm income. Norvell and Lattz (1999) survey a random sample of
Illinois producers and show that price and income risk management
rank second (following computer education and training) among ten
business categories in which producers identify needs for additional
consulting services. The desire for greater assistance with price
and income risk management is not limited to large farms, as the
proportion of producers expressing this preference actually is highest
for those operating medium-sized Illinois farms (500-999 acres).
Producers have a variety of price and income risk management tools
at their disposal. These include numerous public and private sources
of market information; futures and options contracts; and an increasing
number of yield and revenue insurance instruments. While producers
value and use these tools, they place an even higher value on market
advisory services as a source of price risk management information
and advice. In a rating of seventeen risk management information
sources, Patrick and Ullerich (1996) report that the rank of market
advisors and computerized information services is surpassed only
by farm records. Schroeder, Parcell, Kastens and Dhuyvetter (1998),
find that a sample of Kansas producers rank market advisory services
as the number one source of information for developing price expectations.
Norvell and Lattz (1999) find that twenty-one percent of Illinois
respondents currently use marketing consultants, and that such consultants
tie for first (with accountants), in a list of seven, as likely
to be most important to their business in the future. Among mid-sized
producers, marketing consultants are ranked first as likely to be
important in the future.
Until recently, limited evidence was available regarding the performance
of market advisory services. Gehrt and Good (1993) analyzed the
performance of five advisory services for corn and soybeans for
the 1985 through 1989 crop years. Assuming a representative producer
followed the pricing recommendations for each advisory service,
an average annual net price received was computed and compared to
a benchmark price. They generally found that producers obtained
a higher price by following the advisory service recommendations.
This study had some methodological weaknesses in that it used some
self-reported data from the advisory services, did not fully account
for government program benefits, and did not address yield uncertainty.
Some analyses of advisory services have appeared in the popular
press. Marten (1984) examined the performance of six advisory services
for corn and soybeans for the 1981 through 1983 crop years. Otte
(1986) investigated the performance of three services for corn for
the 1980 through 1984 crop years. These studies indicated the average
price generated by the advisory service recommendations exceeded
the average harvest cash price. Gehrt and Good noted that these
studies had significant shortcomings in methodology that clouded
the conclusions. Top Producer magazine started reporting
evaluations of market advisory services in the early 1990's (e.g.
Powers, 1993).
In September 1994, the Agricultural Market Advisory Service (AgMAS)
Project was initiated, with the goal of providing objective and
comprehensive evaluations of market advisory services for producers.
Since its inception, the AgMAS project has been collecting real-time
pricing recommendations for about twenty-five market advisory services.
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