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Rationality of U.S. Department of Agriculture Livestock Price Forecasts: A Unified Approach

Published online by Cambridge University Press:  28 April 2015

Dwight R. Sanders  and
Mark R. Manfredo
Dwight R. Sanders
Affiliation:
Department of Agribusiness Economics, Southern Illinois University, Carbondale, IL
Mark R. Manfredo
Affiliation:
Morrison School of Agribusiness and Resource Management, Arizona State University, Mesa, AZ
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Abstract

This research presents a systematic and unified approach to evaluating forecast rationality that considers the potential of nonstationarity in forecasts and realized values. The approach is applied to one-quarter ahead U.S. Department of Agriculture livestock price forecasts from 1982 through 2004. Results show that forecasts and realized prices are integrated of the same order, and those that are nonstationary are cointegrated. However, the stationary price forecasts for hogs, turkeys, eggs, and milk are biased and improperly scaled, and forecast errors tend to be repeated. Similarly, nonstationary forecasts for cattle and broilers are also biased and irrational in the long run, but short-run dynamics are rational.

Keywords

forecast evaluationlivestock pricesrationalityC53Q13
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 1 , April 2007 , pp. 75 - 85
Copyright
Copyright © Southern Agricultural Economics Association 2007

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