Abstract
We examine the short-run forecasting problem in a data set of daily prices from 134 corn buying locations from seven states – Iowa, Illinois, Indiana, Ohio, Minnesota, Nebraska, and Kansas. We ask the question: is there useful forecasting information in the cash bids from nearby markets? We use several criteria, including a Granger causality criterion, to specify forecast models that rely on the recent history of a market, the recent histories of nearby markets, and the recent histories of futures prices. For about 65% of the markets studied, the model consisting of futures prices, a market’s own history, and the history of nearby markets forecasts better than a model only incorporating futures prices and the market’s own history. That is, nearby markets have predictive content. But the magnitude varies with the forecast horizon. For short-run forecasts, the forecast accuracy improvement from including nearby markets is modest. As the forecast horizon increases, however, including nearby prices tends to significantly improve forecasts. We also examine the role played by physical market density in determining the value of incorporating nearby prices into a forecast model.
Acknowledgements
The author acknowledges Kevin McNew and Geograin, Inc of Bozeman, Montana for generously providing the data used in the analysis in this paper.
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© 2018 Walter de Gruyter GmbH, Berlin/Boston
Articles in the same Issue
- Invited Article
- Alternative Policy Responses to Increased Use of Formula Pricing
- Articles
- Farm Gate Prices for Non-Varietal Wine in Argentina: A Multilevel Comparison of the Prices Paid by Cooperatives and Investor-Oriented Firms
- Spatial Pricing in Uncontested Procurement Markets: Regulatory Implications
- Structure and Food Price Inflation
- Do Geographical Indications Really Increase Trade? A Conceptual Framework and Empirics
- Using Local Information to Improve Short-Run Corn Price Forecasts
Articles in the same Issue
- Invited Article
- Alternative Policy Responses to Increased Use of Formula Pricing
- Articles
- Farm Gate Prices for Non-Varietal Wine in Argentina: A Multilevel Comparison of the Prices Paid by Cooperatives and Investor-Oriented Firms
- Spatial Pricing in Uncontested Procurement Markets: Regulatory Implications
- Structure and Food Price Inflation
- Do Geographical Indications Really Increase Trade? A Conceptual Framework and Empirics
- Using Local Information to Improve Short-Run Corn Price Forecasts