The forecasting performance of livestock futures prices: A comparison to USDA expert predictions (original) (raw)
Related papers
An analysis of forecasts of livestock prices
Journal of Economic Behavior & Organization, 1992
The paper studies forecasts of U.S. hog and cattle prices provided by both a commodity expert and organized futures markets. Some have argued that futures prices should be efficient forecasts of actual cash prices. We show that cattle futures prices are outperformed by the expert; for hogs, futures prices and the expert are about equal. Analysis of a vector autoregression of the expert's forecasts, the futures prices, and actual cash prices, supports the finding that cattle futures prices are not an ef%ient forecast of actual cash prices. Differing supply dynamics may account for the difference.
Outlook vs. Futures: Three Decades of Evidence in Hog and Cattle Markets
American Journal of Agricultural Economics, 2010
The purpose of this paper is to provide a comprehensive evaluation of the accuracy of outlook forecasts relative to futures prices in hog and cattle markets. Published forecasts from four prominent livestock outlook programs are available for analysis. Most of the series begin in the mid-to late-1970s and end in 2006. Root mean squared error (RMSE) comparisons indicate, with one exception, no meaningful differences in forecast accuracy between outlook forecasts and futures prices. The null hypothesis that futures prices encompass outlook forecasts is rejected in 9 of 11 cases for hogs and 7 of 8 cases for cattle, clearly indicating that outlook forecasts provide incremental information not contained in futures prices. The magnitude of decline in RMSE from combining outlook forecasts and futures prices is non-trivial in almost all cases. The reduction in RMSE for composite forecasts averages -6.3% and -9.0% in hogs and cattle, respectively. Overall, the results of this study provide compelling evidence of the substantial economic value of public outlook programs in cattle and hogs.
The performance of live cattle futures as predictors of subsequent spot prices
Journal of Futures Markets, 1983
wo recent articles in this journal have stimulated new interest in the price T performance of the live cattle futures contract traded on the Chicago Mercantile Exchange. In his article, "A Report on the Systematic Downward %as in Live Cattle Futures Prices," Helmuth (1981) ". . . reports on the discovery of a technique which predicted certain drops in live cattle futures prices with 100-percent accuracy over the period from January 1978 through February 1981 . -. " (p. 347).
How Much Can Outlook Forecasts be Improved? An Application to the U.S. Hog Market
2008
This study investigates the predictability of outlook hog price forecasts released by Iowa State University relative to alternative market and time-series forecasts. The findings suggest that predictive performance of the outlook hog price forecasts can be improved substantially. Under RMSE, VARs estimated with Bayesian procedures that allow for some degree of flexibility and model averaging consistently outperform Iowa outlook estimates
Forecast Performance of Futures Price Models for Corn, Soybeans, and Wheat
2007
A futures price forecasting model is presented which uses monthly futures prices, cash prices received, basis values (cash prices less futures), and marketing weights to forecast the season-average farm price for U.S. corn, soybeans, and wheat. Accuracy of model forecasts are examined using standard measures, such as mean absolute percentage error (MAPE) and root mean squared percentage error (RMSPE). Tests for statistical differences between the futures model forecast and price projections from World Agricultural Supply and Demand Estimates (WASDE), are conducted using the modified Diebold-Mariano test statistic. Forecast encompassing tests are conducted to determine whether the futures model forecasts would benefit by combining them with WASDE projections. Forecast encompassing tests identified several periods where the combination of the two forecast methods would provide a better forecast than the futures model forecasts and so futures model forecast efficiency was rejected during these periods based on the necessary condition.
Use of Forecasts in Decisionmaking: The Case of Stocker Cattle in Florida
Southern Journal of Agricultural Economics
The decision to overwinter feeder cattle hinges directly on the forecast of spring cattle prices. An analysis of price forecasts from several alternative models is presented. The models are evaluated using both the traditional mean square criterion and alternative criteria. The alternative criteria evaluate the profitability of the decision implemented based upon the forecast.
An evaluation of price forecasts of the cattle market under structural changes
Research Papers in Economics, 2015
The specific purpose of this paper is to investigate the potential of a time series analysis technique, namely the Time Varying Parameter Vector Autoregressive Model (TVPVAR) technique, in the development of daily forecasting models for cattle prices in the presence of structural changes. More specific objectives are to integrate smoothing techniques and stochastic volatility into TVPAR modeling framework based exclusively on time series for cash-cattle prices, and to compare the accuracy and evaluate the forecasting performance of this model with the standard VAR model based on forecast accuracy measures.
SSRN Electronic Journal, 2000
Considerable research effort has focused on the forecasting of asset return volatility. Debate in this area centers around the performance of time series models, in particular GARCH, relative to implied volatility from observed option premiums. Existing literature suggests that the performance of any volatility forecast is sensitive to both the data and forecast horizon of interest. This paper rigorously examines the performance of several alternative volatility forecasts for fed cattle, feeder cattle, and corn cash price returns. Forecasts include time series, implied volatility, and composite specifications. The results provide considerable insight into the performance of these alternative volatility forecasting procedures over a range of relevant forecast horizons. The evidence suggests that composite methods be used when both time series and implied volatilities are available. Insight is also gained into the performance of procedures used for scaling one-period volatility forecasts to longer horizons.
The systematic downward bias in live cattle futures: A further evaluation
Journal of Futures Markets, 1985
... competition and the conclusion that price changes follow a random walk, a mechanical trading technique which predicts Futures price changes with accuracy should not be possible when the market is efficient (Helmuth, 1981, p. 347; Mann and Heifner, 1976). Darwin M. Pluhar ...