Grain producers price grain prior to harvest to reduce financial risk and to enhance net returns. Because accomplishing the second objective is debatable, altemative com and soybean preharvest options and hedge marketing strategies were designed to test the hypothesis that preharvest pricing could generate statistically higher average net returns than harvest sales without increasing variability. Weekly seasonal futures price patterns from 1975 to 1994 were used to time marketings. The strategies were applied to Iowa and Ohio model farms. The hypothesis was accepted for some strategies that included options but not for futures-only strategies.I 'n the 1960s, Cootner and Samuelson popularized the random walk theory and .the efficient-market hypothesis. These irnply that prices fluctuate randomly about their intrinsic value and, at any point in time, reflect all available market information. The concept was initially applied to stock markets, which unlike grain are not influenced by seasonal factors related to weather. Using this concept, authors have argued that the optimum investment strategy in the stock market is to routinely buy and hold an index of stocks and bonds rather than attempting to time investments to beat the market (Malkiel, Murphy).During the last thirty years, authors have applied this concept to agricultural futures markets and have conducted marketing efficiency tests (Kamara). Results from these investigations have advanced the debate as to whether preharvest marketing strategies employing hedges and/or options can be used by grain producers to increase profits above those earned through a naive, harvest-time cash marketing strategy. This paper adds to the discussion by examining altemative com and soybean preharvest rnarketing strategies and tests the hypothesis that a set of pre-

Daily average prices for hogs sold through the Hog Accelerated Marketing System (HAMS), an experimental electronic market, were compared to those for similar grade hogs sold through Peoria terminal and Indiana direct markets. Results indicate that prices received by farmers using HAMS increased by $0.94 to $0.99 per 100pounds relative to their previous alternative. Using frequency of price change and average amount of price change as measures of efficient pricing behavior, the electronic market exhibited more efficient behavior than the traditional markets, i.e., average prices changed from one day to the next more frequently and by smaller amounts.

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INTRODUCTIONStructural changes in grain markets, the lack of on-farm storage, increased farm price variability and the desire to separate the harvest delivery function from the pricing function have fostered the development and use of delayed price (DP) as a method of exchange in grain markets. Delayed price is a marketing agreement whereby the seller (often the farmer) delivers grain and passes title to the purchaser (often a grain elevator), but reserves the right to price grain at some future date [Wills]. The seller prices grain in some agreed-to future time period by accepting the buyer's price bid for cash grain sales in that future time period.Until the seller elects to price the grain, prices vary as new market equilibriums are established. The seller of DP grain accepts a "long" cash speculative position and earns speculative profits as price increases. Sellers enter into delayed price agreements when storage is in short supply and futures prices are forecast to increase or basis is expected to strengthen.In contrast, the buyer of DP grain accepts a "short" cash speculative position and earns speculative profits as price decreases. The buyer of DP grain minimizes futures price and basis risks associated with the speculative position by taking an offsetting long position in either the cash or futures market. Offsetting long cash market positions include storing grain, buying grain via a forward contract and -2 -selling grain via a DP contract. Offsetting long futures market positions include buying grain via a futures contract or a commodity option.All price and basis risks are eliminated when the elevator or buyer elects to offset the short DP acquisition with a long cash marketing position. Selecting a long futures position eliminates the price risk, but not the basis risk. In the latter case, the buyer must forecast basis movements in an attempt to earn an acceptable margin for performing the merchandizing function. Buyers minimize basis risk by charging the seller a DP service fee equaling the expected change in basis. Proponents of DP argue that the DP selling method improves grain merchandising operational efficiencies resulting in higher prices paid to farmers. The opponents argue that a local supply effect results in lower prices paid to farmers, and an unacceptable financial risk; the farmer is an unsecured creditor to the elevator until the gra~n is priced. These debates are contributing to the passage of state grain marketing legislation in Ohio, and other states to regulate DP contracts to better protect farmers and grain traders. Although the debate is intensifying and is circulating throughout the Midwest and South, the advantages and disadvantages of DP have been discussed only in the popular press and by legislators. To date, researchers have not examined the issues conceptually or empirically.This article develops a conceptual model to explain the economic effect of the DP selling method on prices paid to corn farmers by an elevator (the effect on local bases) and tests the theory using ...