Questions & Answers

What are long-term baseline projections?

Each year, USDA makes 10-year projections of the food and agriculture sector. The commodity projections are used to forecast farm program costs and to prepare the President's budget. The projections reflect a number of assumptions that are spelled out in a baseline scenario and cover agricultural commodities, agricultural trade, and aggregate indicators of the U.S. farm sector such as farm income.

When are the projections released?

The Departmental baseline report is released in February each year.

What is the difference between a baseline projection and a forecast?

Baseline projections focus on longer term underlying trends based on a set of assumptions, while forecasts focus more on predicting actual outcome within a shorter time frame (1 or 2 years). A USDA "baseline" projection represents one plausible scenario for the next 10 years. These projections assume no shocks, but instead are based on specific assumptions for the macroeconomy, policy, weather, and international developments. Such conditioning assumptions are usually designed to provide a neutral backdrop for the projections to allow the analyses to focus on key long-term underlying factors. For example, macroeconomic assumptions for baseline projections are usually "smoothed," without recessions or economic booms, and agricultural policies are typically assumed to remain unchanged from current law. In contrast, forecasts incorporate additional information that departs from the neutral assumptions of baseline projections and are designed to lead to predictions of actual outcomes.

What are some applications of the baseline?

The commodity projections in the baseline are used to forecast farm program costs and to prepare the President's budget. As a neutral policy scenario, the baseline provides a useful basis of comparison for analysis of alternative polices and market developments. Examples of baseline applications include the following:

  • evaluating the effects of changes in the renewal fuel standard and ethanol production on U.S. agricultural commodity markets and farm income; and
  • analyzing the relationship of U.S. agricultural trade to the economies of developing countries, and comparing these countries' income changes and exchange rate movements with the baseline scenario.

What is the process used by USDA to prepare its 10-year baseline projections?

See USDA Baseline Process.