Transitioning from Forecasts to Estimates: Commodity Receipt Revisions

Last month I revealed the Authoritative Analytics monthly farm financial forecasts (normally reserved for subscribing clients) in an article for the Farmer Mac, Feed magazine.  Most of the questions I received had to do with “why my numbers were so much higher than USDA’s February release?” Since the last of the major commodity receipt components for 2017 was just recently released (Noncitrus Fruits and Nuts 2017 Summary, June 26, 2018), I thought it may be instructive to lay out the process of transitioning from a forecast to an estimate and how that relates to the timing of National Agricultural Statistics Service (NASS) publications.

USDA will officially report the 2017 calendar year estimates for farm income in it’s August release; nearly a full year after the fact. Some wonder why it takes so long to evaluate the preceding year. It all has to do with the timing of NASS surveys and reporting of statistics for commodity receipts and farm production expenditures. The array of reports used to compile commodity receipts are well defined in the ERS Farm Income and Wealth Statistics Documentation. These reports are released at different points between February and June of the calendar year following the year in which they are referencing. In addition to relying on the NASS reports for production and value, there is more information required (such as crop marketing patterns) to convert those commodities reported on a crop year basis.

The expected commodity receipt revisions for 2017 as part of the process of transitioning from a forecast to an estimate should be in the neighborhood of $8 billion.  Most of the revisions are coming from crop receipts ($7.4 billion) and in particular from specialty crops.  The revision for fruit and tree nut cash receipts should be nearly $7 billion and vegetables and melons -$1.9 billion.  It so happens that the commodities with the largest revisions have the least amount of survey activity and statistical reporting during the production cycle.  Livestock cash receipt revisions are much smaller, totaling just over $800 million, with cattle and calves representing the largest share ($782 million).  Most of the revisions were to increase the estimate from the forecast.  The three exceptions were vegetables and melons, cotton, and poultry and eggs.

Figure1
Source: Authoritative Analytics calculations, June 2018.

The extent of revisions clearly illustrates the importance of NASS commodity surveys (all commodities) and how they are critical to achieving an accurate portrayal of farm financial conditions.  Whether these revisions translate directly into 2017 income depends on the results of the expense survey (Agricultural Resource Management Survey) reported in August.  Moreover, 2017 is a census year with data collection winding down and reporting to occur next year.  There will likely be additional revisions to come.  Stay tuned.