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Forecast Performance of WASDE Price Projections for U.S. Corn

Article

Authorship
COLINO, EVELYN DEL VALLE
Date
2015
Publishing House and Editing Place
WILEY-BLACKWELL PUBLISHING, INC
Magazine
AGRICULTURAL ECONOMICS, vol. 46 (pp. 157-171) WILEY-BLACKWELL PUBLISHING, INC
Summary Information provided by the agent in SIGEVA
We conduct a comprehensive evaluation of the season-average price projections for U.S. corn as published by the U.S. Department of Agriculture?s World Agricultural Supply and Demand Estimates (WASDE), an important issue given reduced resources and increased program scrutiny within the Federal Government. This study is the first in the literature to evaluate the WASDE corn projections throughout the entire forecasting cycle using a lengthy evaluation period, marketing years 1980/81 through 2012/... We conduct a comprehensive evaluation of the season-average price projections for U.S. corn as published by the U.S. Department of Agriculture?s World Agricultural Supply and Demand Estimates (WASDE), an important issue given reduced resources and increased program scrutiny within the Federal Government. This study is the first in the literature to evaluate the WASDE corn projections throughout the entire forecasting cycle using a lengthy evaluation period, marketing years 1980/81 through 2012/13. Using the modified Diebold-Mariano (MDM) test we show that WASDE projections provide lower root mean squared errors (RMSEs) than the futures adjusted forecasts for 9 of the 16 forecast periods. Furthermore, an encompassing test reveals that WASDE projections contain incremental information not found in many of the futures adjusted forecasts. Using this information in a composite forecast could improve the overall average monthly futures adjusted forecasts by 12 to 16 percent. Lastly, we examine the economic benefits of using WASDE projections in futures trading and find an overall average benefit of $92 to $ 128 per futures contract. Our results suggest that WASDE corn season-average price forecasts enhance the public good, thereby supporting the role of this publically provided information.
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Key Words
WASDE price projectionscornencompassing testsseason-average price receivedcomposite forecasts