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Rationality of U.S. Department of Agriculture Livestock Price Forecasts: A Unified Approach

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  • Sanders, Dwight R.
  • Manfredo, Mark R.

Abstract

This research presents a systematic and unified approach to evaluating forecast rationality that considers the potential of nonstationarity in forecasts and realized values. The approach is applied to one-quarter ahead U.S. Department of Agriculture livestock price forecasts from 1982 through 2004. Results show that forecasts and realized prices are integrated of the same order, and those that are nonstationary are cointegrated. However, the stationary price forecasts for hogs, turkeys, eggs, and milk are biased and improperly scaled, and forecast errors tend to be repeated. Similarly, nonstationary forecasts for cattle and broilers are also biased and irrational in the long run, but short-run dynamics are rational.

Suggested Citation

  • Sanders, Dwight R. & Manfredo, Mark R., 2007. "Rationality of U.S. Department of Agriculture Livestock Price Forecasts: A Unified Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 39(1), pages 75-85, April.
    • Handle: RePEc:cup:jagaec:v:39:y:2007:i:01:p:75-85_02
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    1. repec:kap:iaecre:v:15:y:2009:i:4:p:470-482 is not listed on IDEAS
    2. No, Sung Chul & Salassi, Michael E., 2008. "A Sequential Rationality and Efficiency Test of U.S. Department of Agriculture Program Crop Price Estimates: Rice, Wheat, and Soybeans," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6814, Southern Agricultural Economics Association.
    3. Sung No & Michael Salassi, 2009. "A Sequential Rationality Test of USDA Preliminary Price Estimates for Selected Program Crops: Rice, Soybeans, and Wheat," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(4), pages 470-482, November.

    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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