USDA corn estimates are accurate overall, says review

The government often is the best source of information about U.S. corn plantings, yields per acre, production, and likely season-average prices, said three researchers who analyzed 80 studies on the accuracy and market impact of USDA reports involving corn. “USDA helps uncover these market conditions for all market participants, thereby providing a level playing field for all, even though the process is sometimes bumpy,” they concluded.

The National Corn Growers Association commissioned the independent study in response to doubts among growers about the accuracy of USDA reports and a decline in voluntary participation rates for the reports. Conducting the review were professors Olga Massa of Virginia Tech, Berna Karali of the University of Georgia, and Scott Irwin of the University of Illinois. Corn is the most widely planted crop in the country and the United States is the largest corn grower in the world.

In their review, Massa, Karali, and Irwin noted “errors in supply and use forecasts contributed to ending stocks forecast errors” due to structural changes in commodity markets that took place in the mid-2000s, along with challenges in predicting periods of economic growth and changes in exchange rates. A decade ago, there was difficulty among market participants to anticipate USDA’s figures for corn stocks, issued quarterly.

But USDA estimates of corn yields were consistently accurate and its price forecasts were more reliable than alternatives based on futures prices, said the professors. The annual Prospective Plantings report in March, the annual Acreage report in June, and the October crop report “were consistently more accurate than private forecasts,” they said. “Most of the evidence confirms” that USDA reports are accurate and reliable. “Even in cases where some shortcomings are highlighted…it is difficult to find better sources of information and previous research shows that private forecasters are not able to beat USDA in most cases.”

The report, ‘”What do we know about the accuracy and impact of USDA reports in the corn market?”, is available here.