The Statistical Forecast Accuracy of the December 10, 2013 USDA Reports

This article examines the statistical forecast accuracy of the December 10, 2013 USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports using the USDA’s statistical validity measures as described by the USDA.  The full article titled “The for Feedgrain, Wheat and Oilseed Markets in 2014”, and is available the KSU AgManager website (www.agmanager.info) at the following web address:

http://www.agmanager.info/marketing/outlook/newletters/archives/GRAIN-OUTLOOK_12-26-13.pdf

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The Forecast Accuracy of the December 10, 2013 USDA Reports

Although it is generally thought that prospects for United States’ 2013 crop production, supply-demand, and price prospects are known with some accuracy by the grain and livestock markets, the USDA’s own forecast accuracy numbers indicated a considerable amount of uncertainty and associated market risk still exists.  Even greater uncertainty still exists in regard to the final supply-demand balances for the 2013/14 marketing years for World wheat and soybeans.  Uncertainty about World coarse grain supply-demand balances is less than for other crop types due to the offsetting variability of coarse grain production in the United States and other countries – particularly in South America.

The Kansas State University forecasts for “new crop” 2013/14 U.S. corn, grain sorghum, wheat and soybeans reflect this supply-demand factor uncertainty.  And of course any changes in foreign crop production and supply-demand prospects will also affect World grain supply-demand balances and market prospects along with any changes in grain supply-demand factors for the United States.

https://i0.wp.com/southeastfarmpress.com/site-files/southeastfarmpress.com/files/imagecache/medium_img/uploads/2013/09/corn-soybean-production-2013.jpg

Grain Storage in the Southeastern United States (source: http://southeastfarmpress.com/)

USDA’s U.S. Grain Domestic Supply-Demand Forecast Accuracy for MY 2013/14

For example, the USDA’s December 2013 forecast of 2013 U.S. corn production of 13.989 billion bushels (bb) has a 90% confidence interval of +/– 2.3%.  This indicates that there is a 90% probability of final 2013 U.S. corn production being within the range of 13.667 to 14.311 bb.  Similarly, the USDA’s December 2013 forecast of 2013 U.S. grain sorghum production of 416 million bushels (mb) has a 90% confidence interval of +/– 7.1%.  This indicates that there is a 90% probability of final 2013 U.S. grain sorghum production being within the range of 386 to 446 mb.  The USDA’s December 2013 forecast of 2013 U.S. soybean production of 3.258 billion bushels (bb) has a 90% confidence interval of +/– 3.4%.  This indicates that there is a 90% probability of final 2013 U.S. soybean production being within the range of 3.147 to 3.369 bb.

For U.S. wheat supply-demand, the amount of 2013 U.S. wheat production – estimated by the USDA to be 2.130 bb – is known with some degree of certainty, with 90% confidence interval of +/– 0.7%.  However, the accuracy of the December 2013 USDA WASDE U.S. wheat export forecast for MY 2013/14 is much less certain, with a 90% forecast confidence interval of +/– 9.6%. This would indicate that the USDA’s December projection of 1.100 bb in U.S. wheat exports in MY 2013/14 has a relatively wide 90% forecast confidence interval of 994 mb to 1.206 bb.

https://ksugrains.files.wordpress.com/2013/12/ad3fb-wheat14.png

Cropland somewhere in the European Union in 2012 (Source: http://nogger-noggersblog.blogspot.com/2012)

USDA’s World Grain Supply-Demand Factor Forecast Accuracy for MY 2013/14

World crop production, supply-demand, and price prospects for the 2013/14 marketing years take into account the uncertainty of both United States’ and Foreign corn, coarse grains, wheat and soybeans supply-demand factors. Generally speaking, the USDA’s own forecast accuracy estimates indicated even more uncertainty about World supply-demand factors than for the U.S. alone.

World Wheat: The USDA’s December 2013 forecast of MY 2013/14 World wheat production of 964.28 million metric tons (mmt) has a 90% confidence interval of +/– 1.5%, compared to a +/– 0.7% confidence interval for U.S. wheat production in MY 2013/14.  The 90% forecast confidence interval for World wheat production in MY 2013/14 is 949.82 to 978.74 mmt – a forecast interval range of 28.92 mmt or 3.0% of forecast World wheat production.  For comparison, the 90% confidence interval for the December 2013 projection of MY 2013/14 World wheat ending stocks of 182.78 mmt is +/– 9.7% (165.05 to 200.51 mmt – a 90% confidence interval range of 35.46 mmt or 19.4% of projected World wheat ending stocks).

World Soybeans: The USDA’s December 2013 forecast of MY 2013/14 World soybean production of 284.94 mmt has a 90% confidence interval of +/– 6.8%, compared to a +/– 3.4% confidence interval for U.S. soybean production in MY 2013/14.  Consequently, the 90% forecast confidence interval for World soybean production in MY 2013/14 is 265.47 to 304.32 mmt – a interval range of 38.85 mmt, and 13.6% of forecast World soybean production.  For perspective, the 90% confidence interval for the December 2013 projection of MY 2013/14 World soybean ending stocks of 70.62 mmt is +/– 27.6% (51.13 to 90.11 mmt – a 90% confidence interval range of 38.98 mmt, and 55.2% of forecast World soybean ending stocks).

World Coarse Grains (Corn, Sorghum, Barley, Oats, Millet, & Mixed Grains): The 90% confidence interval of +/– 3.1% for the USDA’s December 2013 Foreign coarse grain production forecast of 884.36 mmt for MY 2013/14 is greater than that of +/– 2.3% on a percentage basis for the United States (371.72 mmt forecast for MY 2013/14).  Taken together, however, forecast MY 2013/14 World coarse grain production of 1,256.08 mmt has a 90% confidence interval of +/– 2.2% (1,228.15 to 1,283.71 mmt – a 90% forecast confidence interval range of 55.56 mmt, which is 4.4% of projected World coarse grain production).   For comparison, the 90% confidence interval for the December 2013 projection of MY 2013/14 World coarse grain ending stocks of 196.92 mmt is +/– 9.7% (177.82 to 216.02 mmt – a 90% confidence interval range of 38.2 mmt, which is 19.4% of projected World coarse grain ending stocks).

https://i1.wp.com/en.ria.ru/images/16030/80/160308064.jpg

The logistics & challenges of handling Russian Grain in 2010 (Source: http://en.ria.ru/business/20100823/160307759.html)

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