Season-Average Price Forecasts
Using Futures Prices To Forecast the Season-Average Price and Price Loss Coverage (PLC) Payment Rate for Corn, Soybeans, and Wheat
Farmers and policymakers are interested in season-average forecasts of prices received by farmers for corn, soybeans, and wheat. These forecasts are also needed to compute Price Loss Coverage (PLC) payment rates and Agricultural Risk Coverage (ARC) payments that began in 2014/15 under the 2014 Farm Act and continued under the 2018 Farm Act. For more information on the PLC and ARC programs, see Agricultural Act of 2014: Highlights and Implications and Agricultural Improvement Act of 2018: Highlights and Implications and USDA's Farm Service Agency (FSA).
This data product provides four Excel spreadsheet models that use futures prices to forecast the U.S. season-average price received by farmers for corn, soybeans, wheat, and cotton. The models also compute the PLC payment rates for marketing years 2014/15 and beyond. The models do not compute ARC program payments for marketing years 2014/15 and beyond because those calculations require State-, county-, or farm-level data. Users can view the model forecasts or create their own forecast by inserting different values for futures prices, basis values, or marketing weights. A brief description of the forecast model components, procedures, and data can be accessed “by clicking on the documentation tab within each of the below spreadsheets; corn, soybeans, wheat, and cotton.”
Previous season-average price forecasts for corn, soybeans, and wheat were also used to compute Counter-Cyclical Payment (CCP) rates for marketing years 2003/04 through 2013/14 (see historical forecasts for these computations). Official USDA CCP rates are available from USDA, FSA. The models did not compute Average Crop Revenue Election (ACRE) program payments for marketing year 2013/14 or earlier because those calculations required State-, county-, or farm-level data.
Using Futures Prices To Forecast the Season-Average Price (SAP) of Upland Cotton
The upland cotton’s SAP is a key parameter in determining the U.S. cotton sector’s financial health and was previously used in determining commodity program payments. However, under the Agricultural Act of 2014, Title 1’s Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs for upland cotton requiring a SAP were replaced by a stacked income protection plan (STAX), which depended, instead, on selected futures prices (Effland et al., 2014;).1 On February 9, 2018, a new seed cotton program was added to Title 1 of the farm bill (National Cotton Council, 2018 and USDA, FSA, 2018). This new program combines lint and cottonseed into one program and provides cotton producers the choice between a PLC or ARC program for the 2018 crop. Thus, a SAP is again needed in calculating payments for the PLC or ARC programs.
The attached Excel file for upland cotton focuses ONLY on forecasting the lint cotton SAP, the same SAP that WASDE currently reports, not the seed cotton SAP from the new seed cotton program, which began with the 2018/19 marketing year.
For each of the three major U.S. field crops, the Excel spreadsheet model computes a forecast for:
- The national-level season-average price received by farmers.
- The implied price loss coverage (PLC) payment rate.
Upland Cotton’s Excel spreadsheet model computes a forecast for the national-level season-average price (SAP) received by cotton farmers.
Note: the model forecasts are not official USDA forecasts. See USDA's World Agricultural Supply and Demand Estimates for official USDA season-average price forecasts. Official USDA PLC rates are available from the Farm Service Agency.
1 Under the 2008 Farm Bill the season-average price (SAP) received by cotton producers was a key policy parameter needed in calculating Counter Cyclical Payment rates or ACRE program payments. In the 2014 Farm Act, the STAX program used a futures price for the projected and actual upland cotton price to determine policy payments.
Errata: On June 16, 2020, the June 2020/21 Season Average Price forecasts for wheat, corn, soybeans, and cotton were reposted to correct coding errors. The 2020/21 Wheat Forecast Table 2 and cell D18 have an updated summarized price data. The 2020/21 Corn Forecast Tab has been updated to reflect a coding error potentially impacting the Effective Reference Price (ERP). The 2019/20 Soybeans Forecast Table 12 now contains the date of the most recent World Agricultural Supply and Demand Estimates (WASDE). The 2020/21 Cotton Forecast Table 7 and cell D18 have an updated summarized price. No other values were affected by these errors.
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