ERS Market Information:Why We Do It and How We Evaluate It

Presentation for Vietnamese OfficialsFebruary 2006

William HahnSenior Economist, Market and Trade

EconomicsEconomic Research Service, USDA

Overview

Why does USDA forecast supply, use, and prices?

How is market analysis used? What makes a market analysis

program effective? How do we evaluate user needs?

Why Does USDA Forecast Supply, Use, and Prices?

Ensures availability of basic data and information to all in the marketplace—big companies and small farmers alike.

Provides process for forecasting key variables in important global markets.

Critical to USDA decision-making on trade policy, domestic programs, etc.

How Is Market Analysis Used?

Public sector— Anticipating, and reacting to, market

developments (e.g., impact of BSE). Formulating new farm policy directions.

Private sector— Farmers: breeding, marketing decisions. Input suppliers: fertilizer, equipment

sales. Exporters: timing, strategic planning

decisions.

What Makes a Market Analysis Program Effective?

Analysts are market experts who are viewed as highly insightful.

Procedures (e.g., surveys, intl. reporting, etc.) are well-regarded, transparent, and made independent of policy officials.

Data and information released by USDA are acknowledged as objective.

Data and information are timely, widely available, and clearly presented.

Different Approaches Are Used to Examine the Benefits of USDA

Forecasts

Various academic studies indicate that: The social benefits of improved

outlook forecasts greatly exceed the costs.

For several commodities, futures market prices can react significantly upon release of USDA forecasts.

In a Special ERS Effort, Users Were Asked About Their Outlook

Needs...

Private Sector Comprehensive survey

conducted in 2000. 916 respondents. Among other issues,

addresses use of— Key data. Formal vs. informal

information. Data vs. information. Public vs. private

sources.

Public Sector Focus groups

conducted in 1997-99. High- and mid-level

USDA participants. Among other issues,

addressed— Most critical types of

output. Impact of absence of

different types of data and information.

As Part of This Effort, USDA Users Were Asked About Their Outlook

Needs...

USDA Source Number of Users Importance 1/ Needs Met 2/ Effect if notavailable 3/

Consultation 101 7.71 3.40 2.82

Attaché Reports 77 6.39 2.72 2.64

WASDE 90 6.14 2.99 2.55

Circular Reports 82 6.00 2.73 2.34

Commodity S&O 93 5.92 2.84 2.25

Baseline 90 5.87 2.81 2.40

1/ Mean importance is evaluated for users of the source only. “0” means source is not used; “10” meanssource is essential. 2/ “1” means not very well; “4” means very well. 3/ “1” means there would be nosignificant effect; “4” means users cannot function without it.

1-10 1-41-4

The Survey of Private Sector Users, Also Part of This Effort, Indicates

That…

Informal information accounts for 2/3 to 3/4 of all information used.

Crop producers and agribusiness rely more heavily on data and public sources than do livestock producers.

Livestock producers rely more on information and private sources.

Seventy-three percent report use of USDA data and/or information; 67% obtain at least a portion directly from USDA.

This Private Sector Survey Indicates That Current Price Data Are Key...

62

48

68

71

67

46

84

90

1

4

46

Economic Conditions

Industry Structural Changes & Trends

Farm Finance and Income

Production/Supply

Inventories and Stocks

Consumption Trends

Price Forecasts

Current Prices

Imports/Exports

Other

Do Not Use Information

Percent of respondents

Source: USDA, Economic Research Service.

We Continually Develop Audiences, Both in USDA and Elsewhere...

China briefing for our Undersecretary in April provided impetus for…

Two-hour briefing at the WAOB for 6 agencies. WAOB: “We’ve got to get the ERS China group

providing critical input to the May WASDE.” Release of publications in a timely way--

“Is China’s Corn Market at a Turning Point?” (1 day after May WASDE)

“China’s Wheat Economy: Current Trends and Prospects for Imports” (4 days after May WASDE)

We Interact With Outlook Program Users Through Various

Mechanisms...

Annual Data Users’ Conference USDA speakers give presentations on future directions

and respond to questions. Approximately 150 private sector/university users attend.

Annual Interagency Review Forum In-house evaluation; includes feedback from users in

industry, government, universities. Consultant Studies (e.g. special studies by Booz Allen

Hamilton, others on the impact of commodity projections). Web Statistics (visits; referrers; pdf openings; etc.).

One-on-One Interaction with Users

Our Website Provides a “Showcase” for

Key Outlook and Research Areas

88 briefing rooms covering all ERS work 19 commodity-focused, 11 country-focused. Others are issue-oriented--U.S. agricultural trade, farm

policy, more.

Broad scope Comprehensive access to outlook, research, data, analysis. Links to other information sources.

Rich in content Broad-based analysis and discussion. Detailed data (increasingly in databases).

We Have a Variety of Outlook Products Housed in These Briefing

Rooms...

Regularly-scheduled publications 14 newsletters (generally monthly, all-electronic). 10 commodity yearbooks (annual). USDA baseline projections report (annual).

Issue-driven, electronic “e-outlook” articles “Is China’s Corn Market at a Turning Point?” “China’s Wheat Economy: Current Trends and Prospects

for Imports” An agency flagship magazine (contains short, topical

articles). Electronic databases and spreadsheets.

Internet Subscribers Receive Automatic Notification of Releases...

Note: Internet subscription totals are as of December, 2005 and include only subscribers through Mann Library at Cornell University. Total subscriptions are approximately double those shown.

Selected Electronic Publications Internet Subscriptions

Cotton and Wool 2,225

Feed 3,095

Fruit and Tree Nuts 2,126

Livestock, Dairy, and Poultry 3,866

Oil Crops 3,314

Wheat 3,499

U.S. Ag. Trade Update 3,865

Outlook f or U.S. Ag. Trade 4,442

Regardless of the Source, We Hear That…

Timeliness and quality are critical We’ve moved from lengthy commodity reports to

newsletters to enhance timeliness. We complement newsletters with high-quality, timely

articles addressing key issues. Effectively meeting data needs is very important

We’re moving to databases across outlook program. Transparency is another key element...

…Tools providing users ability to “do-your-own-analysis.”

…”Models on the web”—so users can have a better understanding of how commodity outlook projections are generated.