«Crop Forecasts Office of the Chief Economist, World Agricultural Outlook Board Miscellaneous Publication No. 1554 Understanding Crop Statistics. ...»
Disposition between various domestic uses, exports, and ending stocks can be affected by indications of changes in many factors. Such signals range from indications of livestock feeding from the NASS Cattle on Feed report to news of reduced crop prospects abroad, to regulatory decisions and changing assumptions regarding the production and use of oxygenate fuels. Expected demand shifts between commodities and countries must be anticipated as price relationships change. New developments in economic conditions, government policies, and global politics also can alter prospects on either side of the equation.
Commodity and Country Coverage
USDA publishes separate balance sheets each month for a number of commodities and countries.
Grains covered in the WASDE report are U.S. and world wheat, coarse grains, corn, and rice; and U.S.
feed grains (corn, barley, sorghum, and oats). Oilseed coverage includes U.S. and world soybeans, and world totals for aggregate oilseeds. The report also forecasts U.S. and world cotton supply and demand.
In addition, WASDE commodity coverage extends to U.S. refined sugar production and use, and to U.S.
supply, use, and price prospects for meat, poultry, eggs, and milk.
Table 2. Projected 1998/99 World Soybean Supply and Use 1/
Source: August 12, 1998 World Agricultural Supply and Demand Estimates report, WASDE-341.
This broad commodity coverage allows analysts to reconcile changes among commodity balance sheets.
Livestock production, for instance, has implications for corn demand and prices, which in turn has an impact on use of competing feedstuffs, industrial use of corn, and potential exports.
The WASDE report publishes estimates for the United States, the world, and selected major countries.
For example, soybean supply and use is reported for the world, the United States, Argentina, Brazil, the European Union, Japan, and China. However, in order to estimate world soybean supply and demand, separate balances are prepared for 90 countries. This depth is crucial for obtaining a true global picture of trade prospects and trends. For example, numerous small changes in soybean crop prospects or import needs for relatively minor market participants can negate or augment better-known developments in major countries.
The monthly release of the WASDE report is quickly followed by the publication of more detailed reports from ERS and FAS. These reports are consistent with estimates in the WASDE report and receive interagency clearance prior to release. ERS Situation and Outlook reports analyze market prospects and developments, especially for the United States. FAS Circulars report supply and demand at the country level and focus on international trade.
The Forecasting Cycle
Supply and demand estimates are forecast on a marketing-year basis. The marketing year for each crop usually begins with the first month of harvesting, and thus can differ by country or region for the same crop. USDA’s marketing year designation for a country may differ from the one used locally, especially where crops such as rice are harvested year around.
Aggregate world supply and demand estimates represent the summation of numerous local marketing years that stretch across many months (see figure 2). For a given year, aggregate world supply and demand estimates represent a concept and not a world total at one point in time. For example, the 1998/99 marketing year for U.S. corn begins on September 1, 1998, and ends August 31, 1999. The WASDE report also includes a forecast of 1998/99 corn supply and use for South Africa, where harvest begins in May 1999 and the marketing year for that crop ends in April 2000. Since South Africa competes with us in world corn markets and most of its exports occur shortly after harvest, USDA includes South Africa in the world totals for 1998/99.
The forecasting cycle for the new marketing year begins with projections in the May WASDE report.
NASS publishes its first estimate of U.S. winter wheat production in May, and spring wheat and other small grains production in July. For spring-planted crops, most notably corn, soybeans, and cotton, May, June, and July projections of U.S. crop production in the WASDE report are based on trend yields and NASS estimates of intended and planted acreage. The assumptions used are spelled out in the footnotes of each table. For both U.S. and foreign estimates, normal weather is assumed for the balance of the growing season. These early-season projections, for both the United States and the world, while necessarily highly tentative, provide a preliminary look at crop supplies and market conditions.
The Consensus Estimating Process A consensus or “interagency” approach is used to arrive at supply and demand estimates. Consensus forecasts employ “models” of all types, formal and informal. While no single USDA agency or
information source dominates the process, each agency contributes based on its relative strength:
FAS provides information regarding foreign production, use, and trade. FAS gathers global market intelligence from its network of agricultural attaches. This information is assembled and reviewed in FAS Headquarters by commodity and trade analysts and circulated to all participants in the interagency process. Satellite imagery is interpreted to assess foreign crop production potential.
• ERS identifies the most important economic effects and implications for prices, quantity supplied, and quantity demanded. This may include information on such diverse factors as exchange rates, oil prices, the effects of domestic and foreign agricultural policy, and economic growth. ERS analysts routinely interact with analysts in the FAS.
The Farm Service Agency (FSA) describes the current policy environment and particularly how farmers likely will react to current legislation. FSA employs econometric models, tempered by specialist expertise. This activity involves considerable interaction with ERS.
The Agricultural Marketing Service (AMS) provides current price and marketing reports for crops and livestock. AMS marketing specialists monitor markets in action on a daily basis and share observations with USDA analysts department wide.
WAOB coordinates the interagency process, convenes the Interagency Commodity Estimates Committees, and conducts a monthly “lockup” from which the WASDE report is released.
WAOB also operates the Joint Agricultural Weather Facility, which monitors global weather and assesses its impact on foreign crop conditions and potential yields.
All of these diverse information sources are assimilated each month by Interagency Commodity Estimates Committees. During the overnight lockup meeting, each committee reviews all relevant information and approves the detailed country estimates that are aggregated in world commodity totals.
Foreign Production Estimates Much of the strength in USDA’s forecasting program derives from the resources available for making country estimates. FAS is the lead agency for the foreign crop estimates that appear in the WASDE report. FAS’s considerable information and analytical resources begin with its agricultural attachés, located at U.S. embassies abroad. Attachés survey current growing conditions, evaluate trade prospects, and maintain contact with government and commercial sources.
In Washington, one group of FAS analysts uses attaché reports, weather data, and satellite imagery analysis to propose changes in foreign production estimates for interagency review and clearance. Other analysts separately propose changes in foreign use and trade data. This division of responsibilities provides a check and balance system to ensure accuracy and integrity of crop production assessment in the supply and demand estimates. This process is designed to assure unbiased forecasts.
Satellite imagery analysis performed by the Production Estimates and Crop Assessment Division of FAS enhances the accuracy and reliability of production forecasts. The imagery is used to monitor the condition and expected yield of foreign crops economically important to the United States: wheat, coarse grains, rice, oilseeds, and cotton. Satellite coverage is global and is adjusted throughout the year to focus on Northern or Southern Hemisphere countries as the season dictates.
Official crop statistics of other nations, where available, are critical in forming current estimates. In practice, not all countries have crop-estimating agencies capable of making reliable, timely, or objective production forecasts. Also, many major producing and trading countries do not publish crop reports until well after the crop has been harvested. In the interim, USDA must rely on the historical record compared with current conditions.
The Joint Agricultural Weather Facility WAOB manages the Joint Agricultural Weather Facility (JAWF), a combined effort of USDA and the National Oceanographic and Atmospheric Administration (NOAA) of the U.S. Department of Commerce. JAWF experts assemble global weather data and assess its impact on crop and livestock production prospects.
NOAA meteorologists on the JAWF staff provide weather information, including data from more than 6,000 stations around the globe, weather-satellite imagery, weather analyses, and interpretations of meteorological information for use in agricultural assessments. Then, agricultural meteorologists from WAOB merge this information with climatological analyses and agronomic data to arrive at the weather’s impact on agricultural yields. Assessments are made on a daily basis. Qualitative assessments of domestic and international agricultural weather conditions are published in the Weekly Weather and Crop Bulletin, jointly produced by WAOB, NASS, and NOAA.
JAWF’s assessments of crop-yield potential are integrated into USDA’s monthly foreign production estimates. The evaluation of a crop’s yield response is based upon the cumulative effects of weather during crop development. A crop’s estimated response to anomalous weather is a function of crop type and growth stages.
Knowledge of historical climate data and production patterns in agricultural regions around the world is critical to JAWF’s assessments of weather’s impact on crop yields. It is also of great interest to the public. Major World Crop Areas and Climatic Profiles, Agriculture Handbook No. 664, provides useful background information, including detailed crop maps, crop calendars, production statistics, and climate data for key producing regions and countries.
Forecast Evaluation Each month, USDA publishes a scorecard of the accuracy of its U.S. and world commodity forecasts in the WASDE report. See table 3 for an example of the reliability of the USDA’s August soybean estimates.
Periodically, WAOB conducts an in-depth analysis and evaluation of WASDE forecasts. These unpublished assessments focus on the accuracy of monthly estimates starting from the first forecast for a given marketing year in May through the “final” estimate 19 months later. The purpose of this review is to identify forecasting bias, if present, and guard against repetitive errors.
For those interested in reviewing how forecasts change from month to month, WAOB has published a spreadsheet of historical crop, livestock, and dairy estimates from past WASDE reports. The data set includes U.S. forecasts only.
Table 3. Reliability of August Projections of Soybean Supply and Use
Source: August 12, 1998, World Agricultural Supply and Demand Estimates report, WASDE-341.
Service to Data Users The value of USDA statistics to data users depends on the ease, speed, and cost of access. NASS and WAOB make special efforts to assure that reports are widely available within a short time of their release. Immediately after the 8:30 ET release time, wire service reporters electronically file their stories on the Crop Production and WASDE reports from facilities within the lockup area. At the same time, NASS and WAOB quickly post the reports on the Internet. Internet users will find the latest reports and other helpful information on NASS crop and livestock estimates at http://www.usda.gov/nass. WAOB information on supply and demand estimates and agricultural weather is located at http://www.usda.gov/oce/waob. USDA provides a combined calendar of reports from NASS, WAOB, ERS, and FAS at http://www.usda.gov/news/calindex.htm.
In partnership with ERS, NASS and WAOB maintain a central archive of reports and databases on the Internet at http://usda.mannlib.cornell.edu.
Reports are also readily available by fax, electronic mail, and in print. Subscribers to printed reports receive rapid service through the ERS-NASS order desk. For more information on these options, contact the customer service numbers below.
USDA’s efforts to improve the scope and usefulness of crop estimates are guided by the needs and suggestions of statistics users. Feedback comes from annual “data user” meetings, held to solicit public input and respond to concerns, as well as from calls and correspondence. Each agency has established a single point of contact for customer service to ensure that inquiries, problems, and suggestions receive a prompt response. For NASS customer service, call 1-800-727-9540; to contact WAOB call 202-720- 5447.