The Value of Public Price Forecasts: Additional Evidence in the Live Hog Market
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USDA and Cooperative Extension Service forecasts of hog prices are directly tested
for incremental value vis-à-vis futures-based forecasts in a forecast encompassing
framework. At horizons less than six months, the lean hog futures-based forecast
is found to be more accurate than both the USDA and Extension Service forecasts,
and the difference in forecasting performance is statistically significant. Not only
are the agency forecasts less accurate, but neither the USDA nor the Extension
Service forecasts add incremental information relative to the futures forecast. The
results suggest that extension forecasters may want to refocus forecasting efforts
on basis relationships, longer forecast horizons, or commodities without active
futures markets.