Accuracy of USDA forecasts of corn ending stocks
The forecast of 2013-14 marketing year ending stocks declined by 185 million bushels from April to May this year. Reading directly from the line fit in Figure 3, the change suggests that the current forecast of year ending stocks is 139 million bushels too high. The fit is not good enough to generate a lot of confidence, but that result is very different than current market expectations that year ending stocks will exceed the current USDA forecast. A large over-estimate of year ending stocks would imply that the forecast of feed and residual use of corn is too low.
We summarize the accuracy of WASDE forecasts of marketing year ending stocks of U.S. corn for the 1990-91 through 2012-13 marketing years and discuss the implications for the May 2014 WASDE ending stocks estimates. Three main implications emerge. First, WASDE ending stocks projections for U.S. corn across the forecasting cycle are basically unbiased, having only a slight tendency towards under-estimation of final ending stocks. Second, the first WASDE estimate of ending stocks for U.S. corn, released in May before harvest, has a large potential range of errors. This is sensible since the ending stocks forecast at this early point in the forecasting cycle reflects both production and usage errors. Third, there is a clear tendency for the USDA to "smooth" the changes in projections of year ending stocks later in the forecast cycle. This tendency suggests that the WASDE ending stocks forecast for the 2013-14 marketing year released earlier this month (1.146 billion bushels) may be over-estimated. Intriguingly, this is the reverse of current market expectations that year ending stocks for 2013-14 will exceed the current USDA forecast.
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