Publication
How informative are the USDA Baseline Projections?
Authors
Siddhartha Bora, PhD candidate, Department of Agricultural, Environmental, and Development Economics (AEDE)
Ani Katchova, Professor and Farm Income Enhancement Chair, AEDE
Quick Take
Farmers, advisors, and agribusinesses depend on data from the U.S. Department of Agriculture to make decisions on crop production and investments in their agricultural operations. The USDA releases annual farm income forecasts that predict national and state-level farm income, cash receipts, production expenses, and government payments. They also release baseline projections—a 10-year projection of commodity prices, yields/acres harvested, exports/imports, and farm income. This information not only helps producers, but also informs decision-makers as they shape the federal budget and estimate spending for Farm Bill programs.
It is important to note that the one-year forecasts are very different than the 10-year baseline projections. The current year forecasts tend to be relatively accurate. The baseline projections, on the other hand, look much farther into the future and assume all conditions remain the “status quo,” meaning things like climate conditions, U.S. policy, and international trade agreements stay exactly as they are when the projections are calculated. Obviously, these conditions can change over the 10 years that the projections cover.
So, researchers wondered, how accurate are these 10-year projections? And can they be improved?
Siddhartha Bora and Ani Katchova, with the Department of Agricultural, Environmental, and Development Economics in the College of Food, Agricultural, and Environmental Sciences, recently conducted the first reported analysis of these projections. Their Farm Income Enhancement Program aims to determine the accuracy of agricultural information, with a primary focus on corn and soybeans, Ohio’s most widespread crops. And as we get closer to the implementation of the 2023 Farm Bill, having accurate information on projections is critical.
Results
- While yield projections were accurate for a longer period of time because they are relatively stable, some volatile information—like prices—were less so.
- Crop yields and harvested acres appear to be accurate for about 9 years.
- Farm prices remain accurate for only about 2 to 4 years.
- Although the accuracy of these baseline projections declines the farther into the future they go, they still serve as helpful tools when thinking through a variety of conditional scenarios that may impact crop yields, harvested acres, and issues related to the Farm Bill Program. Therefore, they deserve more attention from the media, agricultural stakeholders, and decision-makers.
- Revisions to the existing projection models could improve the accuracy of some USDA baseline variables, making them even more helpful.
Citation
Bora, S., Katchova, A. “How Informative are the USDA Baseline Projections?” Farm Income Enhancement Program, Department of Agricultural, Environmental, and Development Economics, The Ohio State University, March 2022. https://aede.osu.edu/about-us/publications/how-informative-are-usda-baseline-projections