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?

The Process

USDA's long-term agricultural projections provide a scenario for the farm sector for the next 10 years. Projections cover agricultural commodities, agricultural trade, and aggregate indicators of the sector, such as farm income. The projections identify major forces and uncertainties affecting future agricultural markets; prospects for global long-term economic growth, consumption, and trade; and future price trends, trade flows, and U.S. exports of major farm commodities. The projections are also used to analyze impacts of alternative policy scenarios.

The projections are one representative, longrun scenario for the agricultural sector based on specific assumptions regarding macroeconomic conditions, agricultural policy, weather, and international developments. The Agricultural Act of 2014 is assumed to remain in effect through the projections period. The projections scenario also assumes that there are no shocks due to abnormal weather, business cycles, or other factors affecting global supply and demand. The projections are not intended to be a Departmental forecast of what the future will be, but instead a description of what would be expected under these very specific assumptions. As such, the projections provide a neutral backdrop, reference scenario that serves as a point of departure for discussion of alternative farm sector outcomes that could result under different domestic or international assumptions.

The USDA projections reflect a composite of model results and judgment-based analysis. The analysis is conducted by interagency committees in the Department, with the committees chaired by the World Agricultural Outlook Board (WAOB). The Interagency Agricultural Projections Committee, also chaired by the WAOB, oversees the process by coordinating the projections and reviewing and clearing reports and related Web products.

In addition to the WAOB, other agencies involved with the long-term projections analysis and review include the Economic Research Service; the Farm Service Agency; the Foreign Agricultural Service; the Office of the Chief Economist; the Office of Budget and Program Analysis; the Risk Management Agency; the Agricultural Marketing Service; the Natural Resources Conservation Service; and the National Institute of Food and Agriculture. The Economic Research Service has the lead role in preparing the USDA long-term projections report.

The Departmental long-term projections report is released in February each year.

The Timeline

The projections process that leads up to the annual report starts in the preceding summer. In August and September, domestic and international macroeconomic assumptions are prepared, covering variables such as gross domestic product, inflation, exchange rates, and population. Detailed foreign country and commodity projections then are prepared in October to support the global trade analysis and U.S. export projections. The core domestic analysis for program commodities takes place in November, which incorporates the trade analysis results. The domestic projections for crops also make use of preliminary projections for the livestock sector in order to appropriately represent crop-livestock interactions. Final projections for livestock and other non-program commodities are completed in late November and early December. Livestock projections incorporate the feed price projections from the crop-sector analysis to ensure internal consistency between agricultural subsectors.

The Economic Research Service derives implications of the commodity projections for agricultural trade measures and farm income to provide sectorwide economic projections for the Departmental long-term projections report. Projections for these aggregate indicators are made in December and January.