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|
|Date of revision:|
|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|
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