USDA Criticized for Inaccurate Harvest Predictions

Tom Polansek of the Wall Street Journal reports that USDA's "failure to accurately predict the size of the current corn-crop harvest has undermined confidence of some investors in the agency's forecasting."  Recently, USDA dropped its prediction for corn production, "sending corn prices up 6%."

"Traders and analysts depend on the agency's crop reports" and the USDA estimates have historically been correct.  Crop predictions are closely watched and come out at set times each month.  These monthly predictions "often cause immediate price swings."  They also "influence what a farmer will plant, how much hedging a farmer will do, and whether an investor will buy or sell."

Dennis Gartman, publisher of the Gartman Letter, said, "Our confidence in the USDA to have any reasonable numbers available to us has been shaken to the very core."

Corn crop forecasts "are based on surveys of farmers' expectations and actual field visits.  USDA officials have acknowledged that the agency's computer models failed to account for the declining quality of the corn until late in the harvest."

To read the Wall Street Journal story, click here.

Posted: 10/22/2010