USDA Commodity Forecasts:
Inaccuracies Found May Lead to Underestimates of Budget Outlays
PEMD-91-24, Aug 13, 1991
Pursuant to a congressional request, GAO examined the Department of Agriculture's (USDA) long-term commodity forecasts used in the President's budget process, focusing on the: (1) accuracy of those long-term supply and utilization forecasts, referred to as baselines; and (2) effect that forecast inaccuracies could have on outlay estimates in the President's January 1990 budget submission.
GAO found that: (1) USDA baseline forecasts, particularly those made 3 to 5 years in advance, exhibited both large total error rates and consistent bias error components; (2) weather, macroeconomic factors, and program and policy assumptions contributed to baseline forecast inaccuracies; (3) USDA forecasts for the first 2 years tended to be more accurate than GAO benchmarks, but GAO benchmarks for the third through fifth years showed less bias error than the USDA forecasts; and (4) if the bias error exhibited in long-term forecasts for crop years 1981 through 1988 continued, and if the 1985 farm bill provisions had been extended, costs for the commodity programs could have been $19.5 billion higher than estimated in the President's January 1990 budget submission.
- Review Pending
- Closed - implemented
- Closed - not implemented
Recommendation for Executive Action
Recommendation: The Secretary of Agriculture should specifically direct the World Agricultural Outlook Board to measure and report forecast accuracy of 5-year baselines, as well as develop and report on benchmark forecasts.
Agency Affected: Department of Agriculture
Status: Closed - Implemented
Comments: USDA has calculated some measures of forecast accuracy and compared its forecasts with benchmark alternatives. Additional results are expected by the end of 1993.