Evaluating the USDA’s Net Farm Income Forecast
By: Kuethe, Todd H.; Hubbs, Todd; Sanders, Dwight R.
Kuethe, Todd H.; Hubbs, Todd; Sanders, Dwight R., Evaluating the USDA’s Net Farm Income Forecast, Journal of Agricultural and Resource Economics, Volume 43, Issue 3, September 2018, Pages 457-468
The USDA produces four forecasts of net farm income for each year; these forecasts are closely monitored by decision makers across the agricultural sector. However, little is known about the performance of these forecasts. Traditional forecast evaluation tests suggest that between 1975 and 2016, the long-horizon forecasts systematically under-predicted realized values. In addition, the shorter-horizon forecast revisions overreact to new information. The findings suggest that forecast users should adjust their expectations and that the USDA may want to consider other forecast approaches to supplement current procedures.