Thursday, August 12, 2010

Comparison to USDA

Not bad overall. I think we can start with a discussion of ' a big crop gets bigger'. This isn't just a feeling you get but I suspect a statistical fact. I've mentioned several times that the uncorrected model is if we finish the year in the current conditions, but because they more often decline than they improve or stay the same, the corrected model is the best guess for end yields. But what happens if conditions don't decline through the year? Well the corrected model would be making a downward adjustment for crop problems that never occur, and as we get closer and closer to the end of the season, the adjustment gets smaller and it would increase to meet the uncorrected model.

Now, given the way the USDA seems to do their estimates, in the parameters, there would be embedded this normal decline. A simple fact of estimation. Then in September, even if those input variables didn't really change, yields are likely to be slightly higher because the time left for problems to arise has declined. So in years where conditions stay strong, the crop does get 'bigger' as time goes by. No real surprise here.

I'm on the low side of corn yields but closer on production. I've put up the spreadsheet with state by state comparisons. There are some places where if I updated the model I would go in and look at some of the parameters. For instance, I'm only abandoning 188,000 acres in Minnesota. This is actually mostly silage and silage averages about 450,000 acres, so the USDA harvesting rate looks much more plausible. Also Nebraska, the model did poorly with yields last year and it appears to be doing the same this year. Conditions are similar to last year and last year produced 178 bu/ac. So I think I'm under predicting in Nebraska for production. In the end my off-setting errors in corn put me pretty close to the right national numbers, closer than most of the trade on production. But if you take apart the state by state numbers you could certainly find some disagreement in what I have.

For soybeans, I'd say I'm pretty close. The same issue of a big crop gets bigger apply here as well, and in cotton for that matter too. The USDA yield was on the upper end of the trade estimates as were my model results. I don't have the same abandonment issues in soybeans. Kansas (low) and Minnesota (high) seem to have offsetting errors, but certainly stand out as having significantly different yield numbers than USDA.

For cotton, USDA trimmed yields a bit but production rose slightly. The USDA number hit in the range of trade. Now my yield is above the USDA's but I also have a slightly higher abandonment rate than USDA. USDA shows about 300,000 more acres of cotton being harvested on the same planted area than I do. Almost all of this coming from Texas. I actually have higher yields than USDA in Texas but also higher levels of abandonment which makes the two models 150,000 to 250,000 bales lower than USDA for cotton production in Texas. It is stating the obvious, but this is the difference that matters and will drive the final numbers.

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