Our “Folly of Prediction” podcast included an interview with Joe Prusacki, who directs the statistics division at the USDA’s National Agricultural Statistics Service. This means he helps make crop forecasts (read a primer here). As hard as the USDA works, the fact is that predicting the future of even something as basic as crop yield can be maddeningly difficult. The Wall Street Journal has the latest in an article headlined “Erroneous Forecasts Roil Corn Market”:
Government reports about the U.S. corn crop have become increasingly unreliable of late, contributing to wild swings in corn prices, a Wall Street Journal analysis shows.
Over the past two years, the Department of Agriculture’s monthly forecasts of how much farmers will harvest have been off the mark to a greater degree than any other two consecutive years in the last 15, according to a Journal analysis of government data. This year’s early-season forecasts also appear to have been way off. The next monthly report is due on Friday.
It isn’t just yields the USDA has gotten wrong — it’s stockpiles, too:
At the same time, periodic stockpile reports—government estimates of how much corn is stored in farm silos and other storage facilities—have generated big surprises. The average monthly swings in stockpile estimates between May and October, the heart of the growing season, have been greater this year than in any year since 1996, according to the Journal analysis.
The consequences of these bad predictions are real and large:
The stockpile reports have had a big effect on markets. On Sept. 30, the USDA said a quarterly survey showed corn stockpiles were 23% higher than it had estimated earlier that month. Corn prices fell 6.3% in the futures market that day, shaving $5 billion off the value of corn in the fields.