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Understanding USDA Corn and Soybean Production Forecasts: Methods, Performance and Market Impacts over 1970 - 2005

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

The purpose of this report is to improve understanding of USDA crop forecasting methods, performance and market impact. A review of USDA’s forecasting procedures and methodology confirmed the objectivity and consistency of the forecasting process over time. Month-to-month changes in corn and soybean production forecasts from 1970 through 2005 indicated little difference in magnitude and direction of monthly changes over time. USDA production forecast errors were largest in August and smaller in subsequent forecasts. There appeared to be no trend in the size or direction of forecast errors over time. On average, USDA corn production forecasts were more accurate than private market forecasts over 1970-2005, with the exception of August forecasts since the mid-1980s. The forecasting comparisons for soybeans were somewhat sensitive to the measure of forecast accuracy considered. One measure showed that private market forecasts were more accurate than USDA forecasts for August regardless of the time period considered. Another measure showed just the opposite. As the growing season progresses the difference in the results across the two measures of forecast accuracy diminished, with USDA forecast errors in soybeans about equal to or smaller than private market errors. USDA corn production forecasts had the largest impact on corn futures prices in August and recent price reactions have been somewhat larger than historical reactions. Similar to corn, USDA soybean production forecasts had the largest impact on soybean futures prices in August with recent price reactions appearing somewhat larger than in the past. Overall, the analysis suggests that over the long-run the USDA performs reasonably well in generating crop production forecasts for corn and soybeans.

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Paper provided by University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics in its series AgMAS Project Research Reports with number 37514.

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Date of creation: Feb 2006
Date of revision:
Handle: RePEc:ags:uiucrr:37514
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  1. Isengildina, Olga & Irwin, Scott H. & Good, Darrel L., 2004. "Are Revisions To Usda Crop Production Forecasts Smoothed?," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19027, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  2. 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.
  3. Good, Darrel L. & Irwin, Scott H., 2003. "Understanding USDA Corn and Soybean Production Forecasts: An Overview of Methods, Performance and Market Impacts," AgMAS Project Research Reports 37496, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  4. T. Randall Fortenbery & Daniel A. Sumner, 1993. "The effects of USDA reports in futures and options markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 13(2), pages 157-173, 04.
  5. Falk, Barry L. & Orazem, Peter, 1989. "Measuring Market Responses to Error-Ridden Government Announcements," Staff General Research Papers 11096, Iowa State University, Department of Economics.
  6. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  7. Egelkraut, Thorsten M. & Garcia, Philip & Irwin, Scott H. & Good, Darrel L., 2002. "An Evaluation Of Crop Forecast Accuracy For Corn And Soybeans: Usda And Private Information Services," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19068, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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