USDA’s Economic Research Service and Use of Weather Data Ed Allen

USDA’s
Economic Research Service
and Use of Weather Data
Ed Allen
Cross Commodity Analyst for Field Crops
Market and Trade Economics Division
March 31, 2010
ERS mission
The mission of ERS is to inform and
enhance public and private decisionmaking on economic and policy issues
related to agriculture, food, natural
resources, and rural development.
ERS Functions
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Research
Market analysis and forecasting
Database development
Short term policy analysis
ERS research programs areas
Food Economics
Markets & Trade
Economics
Resource & Rural
Economics
Diet, Safety & Health
Animal Products
Agricultural Structure
& Productivity
Food Assistance
Field Crops
Food Markets
Food & Specialty
Crops
Farm & Rural Household Well-Being
Farm & Rural Business
Agricultural Policy and
Models
International Demand
& Trade
Food Security &
Development
Production Economics
& Technology
Resources,
Environmental &
Science Policy
Commodity Market Analysis at the
Economic Research Service
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Purpose: Timely, reliable, and objective
information is essential if a market
economy is to operate efficiently
Analyze and explain
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Current market situation
Short term forecast of supply, demand and
prices
ERS market analysis covers a wide
range of commodities, countries, and
topics
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Wheat
Rice
Corn and other feed crops
Oil crops
Cotton and wool
Fruit and tree nuts
Aquaculture
Sugar and sweeteners
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Livestock, dairy & poultry
Vegetables, fruits, tree
nuts & specialties
Agricultural Trade
Reports—Europe, China,
Brazil, India, Transition
economies, etc.
Food Security Assessment
Agricultural income and
finance
What makes a commodity market
reporting program effective?
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Information needs to be timely and
available to everyone
Information must be regarded as objective
Analysts need to become specialists
Good commodity analysts are good
economists
The successful analyst understands the
commodity market
Quality assurance
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Quality assurance is an essential part of an
effective outlook program.
The Department speaks with one voice
Interagency committees are involved in all
estimates and review of all market outlook
publications released by USDA.
World Agricultural Outlook Board approves all
forecasts
Forecasts must be free from political bias so
political appointees do not dictate forecasts or
conclusions.
How the short-term forecasting
process works...
Data:
Information:
- International
- Domestic
- Attaché reports
- Wire service stories
USDA Interagency Commodity
Estimates Committee Process
Commodity Forecasts Appear in:
WASDE
Newsletters
Circulars
Other Forecasts:
- Farm Income
- Food Prices
- Trade
Policy Decisions:
--Short term
--Long term
The supply and use table: the
basic tool for analysis
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The supply and use table has three main
components:
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SUPPLY
USE
PRICE
Describes the marketing year outcome for a single
commodity
Summarizes market behavior of all buyers and
sellers
Organizes information about a crop
Provides framework for analysis
Some words about forecasting
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Forecasting is an essential part of our analysis
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The basic tool is a model
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But forecasts have limits
A way of organizing and elaborating the relationships
Based on assumptions
Forecasts can be wrong
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Mistaken assumptions
Wrong information
Poor model specification
Weather Is a Key Variable
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Production
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Yield fluctuates mostly with weather (but
also economic variables like fertilizer use)
Area planted and abandonment are often
influenced by weather (i.e. freezes or
floods)
Domestic use and trade
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Occasionally influenced by weather
Some Uses of Weather Data
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Past
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ERS used very disaggregated daily
temperature and precipitation data to
model crop yields for the Risk Management
Agency (crop insurance)
In 1989, yield models for wheat, corn,
soybeans, sorghum, barley, and oats, by
state, using monthly average temperature
and precipitation
Some Uses of Weather Data
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Present
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Corn yield model using weekly and monthly
temperature and precipitation for June, July, and
August in key corn belt states
Soybean yields using monthly averages for top 19
states
Rainfall in West Texas and California for cotton
yields
U.S. drought areas overlap with hay and beef
cattle pasture
Argentina’s precipitation data to compare soybean
yields and drought
Australian drought variable to forecast cotton yield
Some Uses of Weather Data
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Future
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Climate change using regional crop yield,
pest distribution and water availability
weather variables
An Example of Policy Oriented
Research
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A project studying how conservation
programs function as a means of drought
adaptation uses
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Measures of drought such as the Standardized
Precipitation Index and Palmer Modified Drought
Index (station level from NOAA)
County-level monthly precipitation and
temperature (average min, max) data derived
from PRISM Climate Group data.
Long-run station-level precipitation data from the
U.S. Historical Climate Network to estimate
regional differences in drought risk.
An Example of Policy Oriented
Research
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ERS’s biggest obstacle is getting weather data
to the county level
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Much data on conservation program participation,
crop yields, and other variables are at the county
level
Access to daily station-level data and
interpolating it to the county level is needed
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measures of heating degree days, cooling degree
days
measures of exposure to precipitation events of
different intensities.
Historical Data Used More than
Weather Forecasts
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USDA commodity forecasts officially assume
“normal” weather.
Subjective evaluation based on weekly
weather briefings is used to judge satellite
imagery and anecdotal reports.
Weather forecasts are sometimes used to “fill
in” for a variable in a model.
Weather forecasts can influence how
aggressive the committee is at making a
change.
Potential Collaboration Between
CPC, FAS, WAOB, and ERS
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WAOB has Major World Crop Areas and Climatic
Profiles (2006) on their website
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Mix of atlas, crop data, calendars, and weather data
A web product could showcase key production/yield
analysis. For example:
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Drilling down from a map (i.e. Brazil) to a more detailed
crucial map (such as Mato Grosso)
Include more useful details about cropping patterns
Show results from models relating weather and yield that have
been developed but never published
Analysts from different agencies could get credit for
work already done
Analysts from different agencies could be encouraged
to collaborate
Useful websites
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ERS Website
www.ers.usda.gov
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WAOB Weather www.usda.gov/oce/weather/pubs
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