IDEAS home Printed from https://ideas.repec.org/a/eee/jocoma/v30y2023ics2405851323000235.html
   My bibliography  Save this article

Forecasting the U.S. season-average farm price of corn: Derivation of an alternative futures-based forecasting model

Author

Listed:
  • Etienne, Xiaoli L.
  • Farhangdoost, Sara
  • Hoffman, Linwood A.
  • Adam, Brian D.

Abstract

An alternative futures-based procedure is developed to forecast the season-average farm price for U.S. corn, an under-researched price forecast. The new method performs similarly or better than two widely-watched season-average price forecasts, i.e., the World Agricultural Supply and Demand Estimates and the Hoffman futures-based forecasts, at the beginning of the post-harvest season and just as well as those forecasts in most of the other months during the marketing year. We attribute the robust performance of the proposed forecast to its ability to use heterogeneous coefficients for futures and cash prices depending on the underlying market conditions. Improved performance of the proposed forecasts is especially noticeable when the market is more volatile. Overall, the method derived in this study complements the existing forecasts and provides valuable information for decision-makers.

Suggested Citation

  • Etienne, Xiaoli L. & Farhangdoost, Sara & Hoffman, Linwood A. & Adam, Brian D., 2023. "Forecasting the U.S. season-average farm price of corn: Derivation of an alternative futures-based forecasting model," Journal of Commodity Markets, Elsevier, vol. 30(C).
    • Handle: RePEc:eee:jocoma:v:30:y:2023:i:c:s2405851323000235
    DOI: 10.1016/j.jcomm.2023.100333
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2405851323000235
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcomm.2023.100333?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zulauf, Carl & Schnitkey, Gary, 2014. "ARC-CO and PLC Payment Indicator for 2014 Crop Year: October 2014 WASDE U.S. Yield and Price," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 4, pages 1-5, October.
    2. Ron Alquist & Lutz Kilian, 2010. "What do we learn from the price of crude oil futures?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 539-573.
    3. Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-787, October.
    4. Menzie D. Chinn & Michael LeBlanc & Olivier Coibion, 2005. "The Predictive Content of Energy Futures: An Update on Petroleum, Natural Gas, Heating Oil and Gasoline," NBER Working Papers 11033, National Bureau of Economic Research, Inc.
    5. Philip Garcia & Scott H. Irwin & Aaron Smith, 2015. "Futures Market Failure?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 40-64.
    6. Richard E. Just & Gordon C. Rausser, 1981. "Commodity Price Forecasting with Large-Scale Econometric Models and the Futures Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(2), pages 197-208.
    7. Isengildina-Massa, Olga & Irwin, Scott H. & Good, Darrel L., 2010. "Quantile Regression Estimates of Confidence Intervals for WASDE Price Forecasts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(3), pages 1-23, December.
    8. Scott H. Irwin & Darrel L. Good, 2004. "Evaluation of USDA Interval Forecasts of Corn and Soybean Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 990-1004.
    9. Garbade, Kenneth D & Silber, William L, 1983. "Price Movements and Price Discovery in Futures and Cash Markets," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 289-297, May.
    10. Daniel A. Summer & Rolf A. E. Mueller, 1989. "Are Harvest Forecasts News? USDA Announcements and Futures Market Reactions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(1), pages 1-8.
    11. Zulauf, Carl & Schnitkey, Gary, 2014. "ARC-CO and PLC Payment Indicator for 2014 Crop Year: December 2014 WASDE U.S. Yield and Price," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 4, December.
    12. Eugene F. Fama & Kenneth R. French, 2015. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 4, pages 79-102, World Scientific Publishing Co. Pte. Ltd..
    13. Michael Artis & Massimiliano Marcellino, 2001. "Fiscal forecasting: The track record of the IMF, OECD and EC," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 20-36.
    14. Arnade, Carlos & Hoffman, Linwood, 2015. "The Impact Of Price Variability On Cash/Futures Market Relationships: Implications For Market Efficiency And Price Discovery," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 47(4), pages 539-559, November.
    15. Harvey, David I & Leybourne, Stephen J & Newbold, Paul, 1998. "Tests for Forecast Encompassing," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 254-259, April.
    16. Garcia, Philip & Irwin, Scott H. & Leuthold, Raymond M. & Yang, Li, 1997. "The value of public information in commodity futures markets," Journal of Economic Behavior & Organization, Elsevier, vol. 32(4), pages 559-570, April.
    17. Carl R. Zulauf & Scott H. Irwin & Jason E. Ropp & Anthony J. Sberna, 1999. "A reappraisal of the forecasting performance of corn and soybean new crop futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 19(5), pages 603-618, August.
    18. Poghosyan, Armine & Isengildina Massa, Olga & Stewart, Shamar, 2021. "Futures-Based Forecasts Of Us Crop Prices," 2021 Annual Meeting, August 1-3, Austin, Texas 312904, Agricultural and Applied Economics Association.
    19. Evelyn V. Colino & Scott H. Irwin, 2010. "Outlook vs. Futures: Three Decades of Evidence in Hog and Cattle Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 1-15.
    20. Dwight R. Sanders & Mark R. Manfredo, 2005. "Forecast Encompassing as the Necessary Condition to Reject Futures Market Efficiency: Fluid Milk Futures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 610-620.
    21. Scott H. Irwin & Philip Garcia & Darrel L. Good & Eugene L. Kunda, 2011. "Spreads and Non-Convergence in Chicago Board of Trade Corn, Soybean, and Wheat Futures: Are Index Funds to Blame?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 116-142.
    22. Zulauf, Carl & Schnitkey, Gary, 2014. "ARC-CO and PLC Payment Indicator for 2014 Crop Year: September 2014 WASDE U.S. Yield and Price," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 4, pages 1-4, September.
    23. Jiang, Zehui & Liu, Chao & Ganapathysubramanian, Baskar & Hayes, Dermot J. & Sarkar, Soumik, 2020. "Predicting county-scale maize yields with publicly available data," ISU General Staff Papers 202009110700001775, Iowa State University, Department of Economics.
    24. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46, National Bureau of Economic Research, Inc.
    25. Xiaoli L. Etienne & Scott H. Irwin & Philip Garcia, 2015. "Price Explosiveness, Speculation, and Grain Futures Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 65-87.
    26. Hoffman, Linwood A. & Irwin, Scott H. & Toasa, Jose, 2007. "Forecast Performance of Futures Price Models for Corn, Soybeans, and Wheat," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9889, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    27. Michael K. Adjemian & Valentina G. Bruno & Michel A. Robe, 2020. "Incorporating Uncertainty into USDA Commodity Price Forecasts," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 696-712, March.
    28. Andrew McKenzie & Matthew Holt, 2002. "Market efficiency in agricultural futures markets," Applied Economics, Taylor & Francis Journals, vol. 34(12), pages 1519-1532.
    29. William G. Tomek, 1997. "Commodity Futures Prices as Forecasts," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 19(1), pages 23-44.
    30. Irwin, Scott H., 2020. "Trilogy for troubleshooting convergence: Manipulation, structural imbalance, and storage rates," Journal of Commodity Markets, Elsevier, vol. 17(C).
    31. Rogier Quaedvlieg, 2021. "Multi-Horizon Forecast Comparison," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 39(1), pages 40-53, January.
    32. Milacek, Trent T. & Brorsen, B. Wade, 2017. "Trading Based On Knowing The Wasde Report In Advance," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 49(3), pages 400-415, August.
    33. Colino, Evelyn V. & Irwin, Scott H. & Garcia, Philip & Etienne, Xiaoli, 2012. "Composite and Outlook Forecast Accuracy," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), pages 1-19, August.
    34. Isengildina-Massa, Olga & Karali, Berna & Irwin, Scott H., 2020. "Can Private Forecasters Beat the USDA? Analysis of Relative Accuracy of Crop Acreage and Production Forecasts," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 52(4), pages 545-561, November.
    35. Anton Pak, 2018. "Predicting crude oil prices: Replication of the empirical results in “What do we learn from the price of crude oil?”," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 33(1), pages 160-163, January.
    36. Linwood A. Hoffman & Xiaoli L. Etienne & Scott H. Irwin & Evelyn V. Colino & Jose I. Toasa, 2015. "Forecast performance of WASDE price projections for U.S. corn," Agricultural Economics, International Association of Agricultural Economists, vol. 46(S1), pages 157-171, November.
    37. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
    38. Etienne, Xiaoli L. & Irwin, Scott H. & Garcia, Philip, 2014. "Bubbles in food commodity markets: Four decades of evidence," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 129-155.
    39. Fabio L. Mattos & Rodrigo L. F. Silveira, 2016. "Futures Price Response to Crop Reports in Grain Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(10), pages 923-942, October.
    40. Michael K. Adjemian, 2012. "Quantifying the WASDE Announcement Effect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 238-256.
    41. Adjemian, Michael K. & Garcia, Philip & Irwin, Scott & Smith, Aaron, 2013. "Non-Convergence in Domestic Commodity Futures Markets: Causes, Consequences, and Remedies," Economic Information Bulletin 155381, United States Department of Agriculture, Economic Research Service.
    42. Chavas, Jean-Paul & Pope, Rulon D. & Kao, Robert S., 1983. "An Analysis Of The Role Of Futures Prices, Cash Prices And Government Programs In Acreage Response," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 8(1), pages 1-7, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Binrong Wu & Zhongrui Wang & Lin Wang, 2024. "Interpretable corn future price forecasting with multivariate time series," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(5), pages 1575-1594, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael K. Adjemian & Valentina G. Bruno & Michel A. Robe, 2020. "Incorporating Uncertainty into USDA Commodity Price Forecasts," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 696-712, March.
    2. Zhige Wu & Alex Maynard & Alfons Weersink & Getu Hailu, 2018. "Asymmetric spot‐futures price adjustments in grain markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1549-1564, December.
    3. Xiaojie Xu, 2020. "Corn Cash Price Forecasting," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(4), pages 1297-1320, August.
    4. Colino, Evelyn V. & Irwin, Scott H. & Garcia, Philip, 2008. "How Much Can Outlook Forecasts be Improved? An Application to the U.S. Hog Market," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37620, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    5. Evelyn V. Colino & Scott H. Irwin, 2010. "Outlook vs. Futures: Three Decades of Evidence in Hog and Cattle Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 1-15.
    6. Bekkerman, Anton & Brester, Gary W. & Taylor, Mykel, 2016. "Forecasting a Moving Target: The Roles of Quality and Timing for Determining Northern U.S. Wheat Basis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(1), pages 1-17, January.
    7. Markos Farag, Stephen Snudden, Greg Upton, 2024. "Can Futures Prices Predict the Real Price of Primary Commodities?," LCERPA Working Papers jc0145, Laurier Centre for Economic Research and Policy Analysis, revised 2024.
    8. Joshua Huang & Teresa Serra & Philip Garcia, 2021. "The Value of USDA Announcements in the Electronically Traded Corn Futures Market: A Modified Sufficient Test with Risk Adjustments," Journal of Agricultural Economics, Wiley Blackwell, vol. 72(3), pages 712-734, September.
    9. Tao Xiong & Miao Li & Jia Cao, 2023. "Do Futures Prices Help Forecast Spot Prices? Evidence from China’s New Live Hog Futures," Agriculture, MDPI, vol. 13(9), pages 1-16, August.
    10. Zhepeng Hu & Mindy Mallory & Teresa Serra & Philip Garcia, 2020. "Measuring price discovery between nearby and deferred contracts in storable and nonstorable commodity futures markets," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 825-840, November.
    11. Xiaojie Xu, 2018. "Cointegration and price discovery in US corn cash and futures markets," Empirical Economics, Springer, vol. 55(4), pages 1889-1923, December.
    12. Xiaojie Xu, 2017. "Short-run price forecast performance of individual and composite models for 496 corn cash markets," Journal of Applied Statistics, Taylor & Francis Journals, vol. 44(14), pages 2593-2620, October.
    13. Irwin, Scott H. & Sanders, Dwight R. & Good, Darrel L., 2014. "Evaluation of Selected USDA WAOB and NASS Forecasts and Estimates in Corn and Soybeans," Marketing and Outlook Research Reports 183477, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    14. Adjemian, Michael K. & Bruno, Valentina G. & Robe, Michel A., 2016. "Forward‐Looking USDA Price Forecasts," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235931, Agricultural and Applied Economics Association.
    15. Ates, Aaron M. & Lusk, Jayson L. & Brorsen, B. Wade, 2019. "Forecasting Meat Prices Using Consumer Expectations from the Food Demand Survey (FooDS)," Journal of Food Distribution Research, Food Distribution Research Society, vol. 50(1), March.
    16. Prilly Oktoviany & Robert Knobloch & Ralf Korn, 2021. "A machine learning-based price state prediction model for agricultural commodities using external factors," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 1063-1085, December.
    17. Guo, Kevin & Leung, Tim, 2017. "Understanding the non-convergence of agricultural futures via stochastic storage costs and timing options," Journal of Commodity Markets, Elsevier, vol. 6(C), pages 32-49.
    18. Carlotta Penone & Elisa Giampietri & Samuele Trestini, 2022. "Futures–spot price transmission in EU corn markets," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 679-709, July.
    19. Naser, Hanan, 2016. "Estimating and forecasting the real prices of crude oil: A data rich model using a dynamic model averaging (DMA) approach," Energy Economics, Elsevier, vol. 56(C), pages 75-87.
    20. Sanders, Dwight R. & Garcia, Philip & Manfredo, Mark R., 2008. "Information Content in Deferred Futures Prices: Live Cattle and Hogs," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(1), pages 1-12, April.

    More about this item

    Keywords

    Corn; Season-average farm price; Forecast; Futures prices; Cash prices; Marketing weights;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jocoma:v:30:y:2023:i:c:s2405851323000235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jcomm .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.