Can a rational expectation storage model explain the USDA ending grain stocks forecast errors?. Issue 3 (28th October 2021)

• Record Type: Journal Article
• Authors: Zhang, Tianyang; Li, Ziran
• Is Part Of: Journal of futures markets. Volume 42:Issue 3(2022)
• Page Start: 313
• Page End: 337
• Publication Date: 2021-10-28
• Subjects: Commodity exchanges -- Periodicals; Foreign exchange futures -- Periodicals; 332.632
• DOI: 10.1002/fut.22282
• Languages: English
• ISSNs: 0270-7314

Abstract

Abstract: We examine whether, and to what extent, a rational expectation storage model can be used to explain the US Department of Agriculture (USDA) ending stocks forecast errors for corn, soybean, and wheat. We show there is a predictable component of forecast errors from 1980/81 to 2018/19 that can partially be explained by the temporal basis and monthly stocks, two important factors from a rational expectation storage model that codetermines carry. The USDA ending stocks forecasts can be improved by 7.1%, 7.2%, and 4.5% for corn, soybean, and wheat, respectively. The improvement is most significant when the last year's carry is small.