ERS Market Information: Why We Do It and How We Evaluate It Presentation for Vietnamese Officials February 2006 William Hahn Senior Economist, Market and Trade Economics Economic 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  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  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 SourceNumber of UsersImportance 1/Needs Met 2/Effect if not available 3/ Consultation Attaché Reports WASDE Circular Reports Commodity S&O Baseline / Mean importance is evaluated for users of the source only. “0” means source is not used; “10” means source is essential. 2/ “1” means not very well; “4” means very well. 3/ “1” means there would be no significant effect; “4” means users cannot function without it

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 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.

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.