Forecast performance of WASDE price projections for US corn

We conduct a comprehensive evaluation of the season-average price projections for U.S. corn as published by the U.S. Department of Agriculture's World Agricultural Supply and Demand Estimates (WASDE), an important issue given reduced resources and increased program scrutiny within the Federal Government. This study is the first in the literature to evaluate the WASDE corn projections relative to futures adjusted forecasts throughout the forecasting cycle using a lengthy evaluation period (1980/81-2012/13). We find that WASDE projections provide lower RMSEs relative to futures adjusted forecasts for 9 of the 16 forecast periods, 4 of which are statistically different. Encompassing tests show that WASDE projections often provide incremental information not present in the futures adjusted forecasts. Composite forecasts based on futures adjusted forecasts and WASDE projections reduced the RMSEs over all forecast periods by an average 12-16%. Favorable average trading profits may be generated for some forecast months using WASDE projections. Overall, our results suggest that WASDE projections of the U.S. corn season-average price provide useful information to the market and could enhance the efficiency of the agricultural sector.