Incorporating Uncertainty into USDA Commodity Price Forecasts: A Review
By Michael Adjemian, Ph.D., Associate Professor, Department of Agricultural and Applied Economics, University of Georgia, Athens, GA; Valentina Bruno, Ph.D., Professor of Finance and Kogod Research Professor, Kogod School of Business, American University, Washington, D.C.; and Michel A. Robe, Ph.D., The Clearing Corporation Foundation Professor in Derivatives Trading, College of ACES, University of Illinois, Urbana-Champaign, IL and Member of the JPMCC’s Research Council
The U.S. Department of Agriculture (USDA) produces monthly marketing-season-average price (SAP) forecasts for major U.S. crops that are closely watched by farmers and commodity market participants. For decades, the USDA published SAP forecast ranges whose upper and lower bounds had no statistical significance. In 2019, the USDA switched to publishing monthly single-point SAP forecasts. This paper argues that conducting and publishing density forecasts, or providing intervals based on those densities, would be very valuable to consumers of the SAP forecasts.
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