The Forecasting Value of New Crop Futures: A Decision-Making Framework
The statistical forecasting efficiency of new crop corn and soybean futures is the topic of frequent academic inquiry. However, few studies address the usefulness of these forecasts to economic agents' decision making. Each year Central Illinois producers are faced with the decision to plant either corn or soybeans on marginal acreage. Agronomic concerns aside, these decisions hinge on the expected relative return of corn versus soybeans, which is largely a function of expected new crop prices. Do new crop futures prices reliably guide producers into the correct production decision? The results suggest that over the entire period of the analysis, futures markets provide only marginal decision- making information to the producer; however, more recent signals do appear to be useful. Further analysis explores several possible factors that could explain why the signals have improved so significantly since 1985.
|Date of creation:||06 May 1998|
|Note:||Type of Document - pdf; prepared on PC; to print on HP Laserjet; pages: 21; figures: included. Office for Futures and Options Research (OFOR) at the University of Illinois at Urbana-Champaign. Working Paper 98-05. For a complete list of OFOR working papers see|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stein, Jerome L, 1981. "Speculative Price: Economic Welfare and the Idiot of Chance," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 223-232, May.
- Merton, Robert C, 1981. "On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts," The Journal of Business, University of Chicago Press, vol. 54(3), pages 363-406, July.
- Breen, William & Glosten, Lawrence R & Jagannathan, Ravi, 1989. " Economic Significance of Predictable Variations in Stock Index Returns," Journal of Finance, American Finance Association, vol. 44(5), pages 1177-1189, December.
- Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," The Journal of Business, University of Chicago Press, vol. 54(4), pages 513-533, October.
- David Kenyon & Eluned Jones & M. Anya McGuirk, 1993. "Forecasting Performance of Corn and Soybean Harvest Futures Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(2), pages 399-407.
- Kahl, Kandice H. & Tomek, William G., 1986. "Forward-Pricing Models for Futures Markets: Some Statistical and Interpretative Issues," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
- James S. Eales & Brian K. Engel & Robert J. Hauser & Sarahelen R. Thompson, 1990. "Grain Price Expectations of Illinois Farmers and Grain Merchandisers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 701-708.
- Cumby, Robert E. & Modest, David M., 1987. "Testing for market timing ability : A framework for forecast evaluation," Journal of Financial Economics, Elsevier, vol. 19(1), pages 169-189, September.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:9805003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.