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Do Big Crops Get Bigger and Small Crops Get Smaller? Further Evidence on Smoothing in U.S. Department of Agriculture Forecasts

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  • Isengildina, Olga
  • Irwin, Scott H.
  • Good, Darrel L.

Abstract

This study sought to determine whether monthly revisions of U.S. Department of Agriculture current-year corn and soybean yield forecasts are correlated and whether this correlation is associated with crop size. An ex-ante measure of crop size based on percent deviation of the current estimate from out-of-sample trend is used in efficiency tests based on the Nordhaus framework for fixed-event forecasts. Results show that available information about crop size is generally efficiently incorporated in these forecasts. Thus, although this pattern may appear obvious to market analysts in hindsight, it is largely based on new information and hence difficult to anticipate.

Suggested Citation

  • Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2013. "Do Big Crops Get Bigger and Small Crops Get Smaller? Further Evidence on Smoothing in U.S. Department of Agriculture Forecasts," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(1), pages 1-13, February.
    • Handle: RePEc:ags:joaaec:143639
    DOI: 10.22004/ag.econ.143639
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    References listed on IDEAS

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    1. Vogel, Fred A. & Bange, Gerald A., 1999. "Understanding USDA Crop Forecasts," USDA Miscellaneous 320799, United States Department of Agriculture.
    2. Bailey, DeeVon & Brorsen, B. Wade, 1998. "Trends In The Accuracy Of Usda Production Forecasts For Beef And Pork," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(2), pages 1-11, December.
    3. Good, Darrel L. & Irwin, Scott H., 2011. "USDA Corn and Soybean Acreage Estimates and Yield Forecasts: Dispelling Myths and Misunderstandings," Marketing and Outlook Briefs 183528, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    4. Tannura, Michael A. & Irwin, Scott H. & Good, Darrel L., 2008. "Weather, Technology, and Corn and Soybean Yields in the U.S. Corn Belt," Marketing and Outlook Research Reports 37501, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    5. Andrew M. McKenzie, 2008. "Pre-Harvest Price Expectations for Corn: The Information Content of USDA Reports and New Crop Futures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 351-366.
    6. Wisner, Robert N. & Blue, E. N. & Baldwin, E. Dean, 1998. "Pre-Harvest Marketing Strategies Increase Net Returns for Corn and Soybean Growers," Staff General Research Papers Archive 1367, Iowa State University, Department of Economics.
    7. Good , Darrel & Irwin, Scott, 2011. "USDA Corn and Soybean Acreage Estimates and Yield Forecasts: Dispelling Myths and Misunderstandings," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 1, March.
    8. Good, Darrel L. & Irwin, Scott H., 2006. "Understanding USDA Corn and Soybean Production Forecasts: Methods, Performance and Market Impacts over 1970 - 2005," AgMAS Project Research Reports 37514, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    9. Phil L. Colling & Scott H. Irwin, 1990. "The Reaction of Live Hog Futures Prices to USDA Hogs and Pigs Reports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(1), pages 84-94.
    10. Hill, Harvey S.J. & Mjelde, James W., 2002. "Challenges and Opportunities Provided by Seasonal Climate Forecasts: A Literature Review," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(3), pages 603-632, December.
    11. Hill, Harvey S.J. & Mjelde, James W., 2002. "Challenges And Opportunities Provided By Seasonal Climate Forecasts: A Literature Review," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(3), pages 1-30, December.
    12. Sanders, Dwight R. & Manfredo, Mark R., 2002. "Usda Production Forecasts For Pork, Beef, And Broilers: An Evaluation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(1), pages 1-14, July.
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    Cited by:

    1. Bahram Sanginabadi, 2018. "USDA Forecasts: A meta-analysis study," Papers 1801.06575, arXiv.org.
    2. Fiechter, Chad & Kuethe, Todd & Zhang, Wendong, 2023. "Information Rigidities and Farmland Value Expectations," ISU General Staff Papers 202306131414240000, Iowa State University, Department of Economics.
    3. MacDonald, Stephen & Ash, Mark & Cooke, Bryce, 2017. "The Evolution of Inefficiency in USDA’s Forecasts of U.S. and World Soybean Markets," MPRA Paper 87545, University Library of Munich, Germany.
    4. Raghav Goyal & Michael K. Adjemian, 2023. "Information rigidities in USDA crop production forecasts," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(5), pages 1405-1425, October.
    5. Newton, John & Irwin, Scott & Good, Darrel, 2014. "Do Big Soybean Crops Always Get Bigger?," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 4, pages 1-7, September.
    6. Goyal, Raghav & Adjemian, Michael K., 2022. "Information Rigidities in USDA Forecasts," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322339, Agricultural and Applied Economics Association.
    7. Olga Isengildina‐Massa & Berna Karali & Todd H. Kuethe & Ani L. Katchova, 2021. "Joint Evaluation of the System of USDA's Farm Income Forecasts," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 1140-1160, September.

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    More about this item

    Keywords

    Crop Production/Industries;

    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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