USDA Livestock Price Forecasts: A Comprehensive Evaluation

By Sanders, Dwight R.; Manfredo, Mark R. | Journal of Agricultural and Resource Economics, August 2003 | Go to article overview

USDA Livestock Price Forecasts: A Comprehensive Evaluation


Sanders, Dwight R., Manfredo, Mark R., Journal of Agricultural and Resource Economics


One-step-ahead forecasts of quarterly live cattle, live hog, and broiler prices are evaluated under two general approaches: accuracy-based measures and classification-based measures which test the ability to categorize price movements directionally or within a forecasted range. Results suggest U.S. Department of Agriculture (USDA) price forecasts are not optimal. Broiler price forecasts are biased, and all the forecast series tend to repeat errors. While the USDA forecasts are more accurate than those of a univariate AR(4) time-series model, evidence suggests the USDA live cattle forecasts could be improved with a composite forecast that includes a time-series alternative. Despite this, the USDA correctly identifies the direction of price change in at least 70% of its forecasts over the sample period. Furthermore, actual prices fall within the USDA's forecasted range 48% of the time for broilers, but only 35% for hogs. Finally, there is some evidence that the USDA's price forecasting accuracy has improved over time for broilers, but has gotten marginally worse for hogs.

Key words: forecast efficiency, forecast evaluation, livestock prices, USDA forecasts

Introduction

Tyson Foods, Inc., the world's largest producer, processor and marketer of chicken and poultry-based food products, today said that based on operating results through May, it continues to experience operating and margin pressures. These margin pressures are due to previous disruptions in the company's Russian market and to lower-than-expected prices received on its overall product mix....

- Tyson Foods, Inc., Springdale, Arkansas Press Release, june 12, 1997

For agricultural producers and agribusinesses, commodity prices directly affect costs, revenues, and profitability. For example, agribusiness giant Tyson Foods is involved in the production and processing of the three major meats: chicken, beef, and pork. In its public announcements, Tyson Foods clearly indicates that fluctuating meat prices directly affect the company's corporate earnings. Furthermore, Tyson's earnings projections necessarily rely on "forward-looking statements" about market prices (Tyson Foods, Inc.). To provide meaningful guidance to industry analysts, it is important that Tyson-and similar firms-understand and evaluate available price forecasts. Likewise, for smaller agribusinesses, price forecasts are crucial for planning business operations and making investment decisions.

Given the importance placed on agricultural prices, it is not surprising that commodity price forecasting, and the evaluation of forecasts, has long been an area of interest for economists [see, e.g., the early works of Green (1926) and Pettee (1936)]. In particular, forecasts provided by public agencies such as the U.S. Department of Agriculture's (USDA's) National Agricultural Statistics Service (NASS) are of interest. Producers, agribusinesses, and financial institutions use these forecasts to make production, marketing, and lending decisions (USDA/NASS). In fact, the objective of providing market outlook information is to enhance economic decision making, which leads to increased profits, utility, or social welfare (Freebairn). Accurate public forecasts for commodity prices can result in improved decision making by private forecasters, and also reduce market price variation (Smyth). Conversely, systematic errors in forecasts could lead to a misallocation of scarce resources (Stein). Thus, it is important that industry participants understand the uncertainty surrounding USDA price forecasts as well as any systematic biases or inefficiencies they may contain (Aaron).

Most research examining USDA forecasts focuses on the performance of USDA quantity or production forecasts in both crops (Irwin, Good, and Gomez) and livestock (Bailey and Brorsen). For example, as documented by Bailey and Brorsen, the USDA's annual beef and pork production forecasts, published in its "World Agricultural Supply and Demand Estimates" (WASDE) monthly report, are biased predictors over the entire 1982-1996 interval. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

USDA Livestock Price Forecasts: A Comprehensive Evaluation
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.