@article{Adjemian:235931,
      recid = {235931},
      author = {Adjemian, Michael K. and Bruno, Valentina G. and Robe,  Michel A.},
      title = {Forward‐Looking USDA Price Forecasts},
      address = {2016},
      number = {333-2016-14545},
      pages = {26},
      year = {2016},
      abstract = {USDA generates monthly season‐average price forecasts for  key agricultural commodities. Uncertainty about each  forecast is indicated by its publication as a price  interval. USDA’s forecasting methodology is non‐public, but  its uncertainty levels are anecdotally based on historical  patterns of price uncertainty and informed by expert  opinion. No confidence level is
attached to USDA’s  intervals, so it is difficult to gauge their accuracy. But  in practice, realized season‐average prices regularly fall  outside of USDA‐forecasted intervals, particularly those  made prior to harvest and late in the marketing year. We  demonstrate that forward‐looking density forecasts for the  season‐average corn price can be constructed based on the  market’s expectation of volatility implied by commodity  options premia, combined with historical forecast errors  between futures market prices and cash prices paid to  farmers. Because implied volatility
is forward‐looking,  confidence intervals based on these densities reflect  anticipatory market sentiment not present in historical  data. In out‐of‐sample trials, our 95% confidence  intervals
contained the final season‐average price for over  92% of the 358 forecasts made between 1995/96 and 2014/15.  Compared to a model based on historical data alone, the  forward‐looking model is less susceptible to forecast  errors. Our approach can enhance the informational value of  USDA season‐average price forecasts.},
      url = {http://ageconsearch.umn.edu/record/235931},
      doi = {https://doi.org/10.22004/ag.econ.235931},
}