Using USDA Production Forecasts: Adjusting for Smoothing
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Agribusinesses, producers and farm
managers rely heavily on forecasts
made by the U.S. Department of
Agriculture and other government
agencies in forming expectations
that drive management decisions.
While agency forecasts are a
valuable and low cost source of
forecast information, it is commonly
thought that these agencies may
unintentionally make gradual
adjustments to their forecasts. In
other words, agency forecasts may be
“smoothed” such that they slowly
evolve toward a rational forecast. In
this paper, we investigate forecast
smoothing in the USDA’s cotton
production forecasts and
demonstrate how forecasting
practitioners and farm managers
should correct the forecasts.