This Week in Corn Predictions: The USDA Got it Right (Almost)
We’ve been having some fun recently at the expense of people who like to predict things. In our hour-long Freakonomics Radio episode “The Folly of Prediction” — which will be available as a podcast in the fall — we showed that humans are lousy at predicting just about anything: the weather, the stock market, elections. In fact, even most experts are only nominally better than a coin flip at determining a future outcome. And yet there remains a huge demand for professional predictors and forecasters.
As mentioned in the segment, the U.S. Department of Agriculture’s August crop yield report came out today. The result? Not bad actually. The corn production forecast was revised downward by just 4.2% from its estimate last month. That’s an improvement over last year’s big miss, when the August corn production report had to be revised downward by almost 7%.
However, the Wall Street Journal quoted an analyst who seemed to be hinting that the USDA was sandbagging after last year’s whiff:
The department was criticized heavily last year for overestimating the corn crop in August and then slashing its outlook repeatedly in the fall. The cuts made in Thursday’s forecast look “proactive” in adjusting its expectations for the crop, said Bill Gentry, analyst for Risk Management Commodities, a brokerage in Indiana.
The man behind the prediction is Joe Prusacki, the head of USDA’s Statistics Division. Prusaki got loads of angry emails after last year’s missed forecast, which was hurt by dry weather for much of last summer. The weather has been equally bad this year. So us humans are still not great at predictions; and while 4.42% may seem like a trivial number, this causes huge ripple effects in the commodities markets.
CORRECTION: An earlier version of this post incorrectly stated that the corn yield forecast was revised downward by just 1.3%. The Wall Street Journal has issued a correction. This month‘s estimate is 12.9 billion bushels down from an estimate of 13.47 billion bushels last month. The bushel per acre yield has been revised from 158.7 to 153.0.