Do Big Crops Get Bigger and Small Crops Get Smaller? Further Evidence on Smoothing in USDA Crop Production Forecasts

The purpose of this paper is to determine whether smoothing in USDA corn and soybean production forecasts is concentrated in years with relatively small and large crops. The sample consists of all USDA corn and soybean production forecasts released over the 1970 through 2006 crop years. Results show that USDA crop production forecasts in both corn and soybeans have a marked tendency to decrease in small crop years and increase in big crop years. The magnitude of smoothing is surprisingly large, with corn and soybean production forecasts cumulatively revised downward by about 6 to 7 percent in small crop years and upward by about 5 to 6 percent in large crop years. Crop condition ratings are useful in predicting whether the current year is likely to be a small, normal, or big crop year. Hence, there appears to be an opportunity for the USDA to incorporate additional information into the forecasting process to reduce or eliminate the smoothing inherent in different types of crop years.