The Forecasting Value of New Crop Futures: A Decision-Making Framework

Sanders, Dwight R.; Garcia, Philip; Leuthold, Raymond M.

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Description

Title

The Forecasting Value of New Crop Futures: A Decision-Making Framework

Author(s)

• Sanders, Dwight R.
• Garcia, Philip
• Leuthold, Raymond M.

Issue Date

1998-05

Keyword(s)

• corn futures
• soybean futures

Abstract

The statistical forecasting efficiency of new crop corn and soybean futures is the topic of frequent academic inquiry. However, few studies address the usefulness of these forecasts to economic agents’ decision making. Each year Central Illinois producers are faced with the decision to plant either corn or soybeans on marginal acreage. Agronomic concerns aside, these decisions hinge on the expected relative return of corn versus soybeans, which is largely a function of expected new crop prices. Do new crop futures prices reliably guide producers into the correct production decision? The results suggest that over the entire period of the analysis, futures markets provide only marginal decision-making information to the producer; however, more recent signals do appear to be useful. Further analysis explores several possible factors that could explain why the signals have improved so significantly since 1985.

Publisher

Office for Futures and Options Research, Department of Agricultural Economics, College of Agricultural, Consumer, and Environmental Sciences at the University of Illinois at Urbana-Champaign

Series/Report Name or Number

OFOR Working Paper Series, no. 98-05

Type of Resource

text

Language

en

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http://hdl.handle.net/2142/4051

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