An Alternative Method to Forecast Season-Average Price for U.S. Corn

32 Pages Posted: 8 Jan 2019

See all articles by Xiaoli Etienne

Xiaoli Etienne

West Virginia University - Division of Resource Management

Sara Farhangdoost

West Virginia University, Davis College of Agriculture, Forestry, and Consumer Sciences, Division of Resource Management, Students

Linwood Hoffman

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Date Written: December 26, 2018

Abstract

Price forecasts are critical to market participants when making production and marketing decisions and to policymakers who administer commodity programs and assess the market impact of domestic or international events. With the exceptionally volatile conditions experienced in the corn market since 2006, the need for price forecasting has become even more critical. The purpose of this paper is to explore an alternative econometric procedure to forecast the season-average price of corn for U.S. producers, a relatively under-researched price forecast. The new method performs well against two widely-watched season-average price forecasts, i.e., the World Agricultural Supply and Demand Estimates and the futures-based forecasts, in particular at the beginning of the post-harvest season. Additionally, the proposed forecast performs no worse or better than the futures-based forecasts at the beginning of the forecast cycle, as well as from November to August during the marketing year. We attribute the satisfactory performance of the proposed forecast to the model’s ability to assign heterogeneous weights to futures and cash prices depending on the underlying market conditions. Furthermore, the performance of the proposed forecast tends to improve when the market becomes more volatile.

Keywords: corn, season-average price, forecast, futures prices, cash prices, marketing weights

JEL Classification: Q11, Q13

Suggested Citation

Etienne, Xiaoli and Farhangdoost, Sara and Hoffman, Linwood, An Alternative Method to Forecast Season-Average Price for U.S. Corn (December 26, 2018). Available at SSRN: https://ssrn.com/abstract=3306590 or http://dx.doi.org/10.2139/ssrn.3306590

Xiaoli Etienne (Contact Author)

West Virginia University - Division of Resource Management ( email )

Morgantown, WV 26506
United States

Sara Farhangdoost

West Virginia University, Davis College of Agriculture, Forestry, and Consumer Sciences, Division of Resource Management, Students ( email )

Morgantown, WV
United States

Linwood Hoffman

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States

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