USDA Commodity Forecasts:

Inaccuracies Found May Lead to Underestimates of Budget Outlays

PEMD-91-24: Published: Aug 13, 1991. Publicly Released: Sep 20, 1991.

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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.

Recommendation for Executive Action

  1. 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.

    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

 

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