Urbana, Illinois
October 29, 2003
Recent USDA
corn and soybean forecasts have generated strong reactions from
some producers and market analysts, according to a
University of Illinois
agricultural economist. Addressing those concerns, Scott Irwin
and Darrel Good, professors in the Department of Agricultural
and Consumer Economics, have issued a new study, "Understanding
USDA Corn and Soybean Production Forecasts: An Overview of
Methods, Performance and Market Impacts."
The study
is available on the farmdoc website in the AgMAS section at:
http://www.farmdoc.uiuc.edu/agmas/index.html .
"There
appears to be continuing misunderstanding of USDA's motives,
methods and procedures used to arrive at production forecasts
for U.S. corn and soybean crops," said Irwin. "This was vividly
illustrated by comments we received from producers, commodity
analysts and farm market advisory services following the release
of the August 2003 forecasts."
According
to Irwin, many in the agricultural sector questioned the USDA
reports' methods and accuracy and raised doubts about
objectivity.
"Some in
the agricultural community apparently even believe that the USDA
manipulates crop forecasts to fulfill some mystical objectives
that are contrary to the best interests of farmers," said
Irwin.
Irwin and
Good examined the USDA reporting system's methodology and
results from 1970 through 2002 for corn and soybean crops.
"A review
of the USDA's forecasting procedures and methodology confirms
the objectivity and consistency of the forecasting process over
time," said Irwin.
However, he
added that there were errors. There are also some areas where
improvements could be made.
"USDA
production forecast errors are largest in August over the period
studied and smaller in subsequent forecasts," he said. "There
appears to be no trend in the size or direction of forecast
errors over time."
Irwin said
that on average, USDA corn production forecasts are more
accurate than private sector forecasts over 1970-2002, with the
exception of August forecasts since the mid-1980s. |
