Month: August 2005

Understanding USDA Corn and Soybean Production Forecasts : Methods, Performance and Market Impacts over 1970 – 2004

There appears to be continuing misunderstanding of US Department of Agriculture (USDA) motives, methods and procedures used to arrive at production forecasts for US corn and soybean crops. This was vividly illustrated by comments from producers, commodity analysts and farm market advisory services following the release of the August 2003 forecasts. For example, we received the following e-mail inquiry from a farmer after the release of these forecasts:


“I have a question concerning the August and the September crop production reports. A friend told me that the numbers that came out in the August report, which were lower than many predicted, were utilizing a weather forecast for a hotter and drier 30 day outlook, as of August 1 (the forecast would have been for the month of August). He said that the USDA was trying to use a new system, which would take into account the weather forecast, along with the usual crop conditions and yield checks. I was under the assumption that the August crop report took field surveys as of August 1, and then assumed average weather for the rest of the growing season. If my friend was correct, then this could potentially mean that the dropping crop conditions have already been factored in, and that the September report may only have a slight revision downward.”

Market analysts, as represented below, also echoed these concerns:


“There has been considerable dismay in the industry as to USDA’s August corn and soybean estimates. Most do not see them as real objective analysis…We think that NASS just missed it by being too conservative with an immature corn and soy crop.”

These comments nicely illustrate the importance placed on USDA crop forecasts by market participants and the potential for misunderstanding of the methods used to produce the forecasts. Some in the agricultural community apparently even believe that the USDA manipulates crop forecasts to fulfill some mystical objectives that are contrary to the best interest of farmers . There is clearly a need for a better understanding of all aspects of the USDA crop production forecasting process.

The objectives of this report are to 1) provide an overview of the forecasting process for corn and soybean production used by the USDA , 2) present monthly production forecasts for the 1970 through 200 4 corn and soybean crops, 3) examine relationships in the monthly changes in production forecasts, 4) examine errors in the USDA forecasts, 5) compare USDA forecasts to private market forecasts and 6) examine the price response to USDA forecasts and the relationship of the responses to report “surprises . ” This information should improve understanding of USDA crop forecasting methods, performance and market impact.

Please refer to the complete article at:


http://www.farmdoc.uiuc.edu/agmas/reports/05_03/AgMAS05_03.html

Summary of Spring Corn Belt Farm Wage Rates

What is an appropriate wage rate for hired farm labor? Many things drive negotiations on wage, including the worker’s experience, dependability, competency/skill, past wage level and the demands of the job. However, often it is necessary to identify a fair base wage rate from which to negotiate final salary and wage levels.

In this article we discuss two sources of data that can serve as a reference for employers and employees. The first is a general resource that provides information about a broad array of agricultural jobs while the second provides a narrow focus on the hog industry.


USDA Farm Labor Quarterly Report . Every 3 months, the USDA conducts a survey of farm employers throughout the US to determine the going wage rate for different types of jobs and different types of farms. USDA’s last survey of employers was conducted toward April of 2005 and is available at:


http://usda.mannlib.cornell.edu/reports/nassr/other/pfl-bb/


The average wage rates paid in April for hired labor in the Eastern Corn Belt, which USDA defines as Ohio , Indiana and Illinois , was $9.51 an hour. USDA breaks this down by the type of labor primarily performed by the worker. The average wage rate for field work was $8.84, for livestock work was $9.17 and for work involving both field and livestock work was $8.91.


USDA also provides average wages based on the type of farm that employs the laborer, though these statistics are for a slightly broader geographical region that also include Iowa and Missouri . The average hourly wage paid by farms primarily dedicated to field crops was $8.67, to other crops was $8.74 and to livestock or poultry was $9.47.

USDA also breaks out wages paid by the size of the employing farm; in general, larger farms pay more. For the eastern and western Corn Belt combined, the highest average hourly wage paid for all types of farm labor was $10.33, and it was provided by farms with sales greater than $1 million. Farms generating $50,000 to $100,000 in sales paid the lowest hourly wage in the region: $8.10.


National Hog Farmer Study of Industry Compensation Plans. The publication The National Hog Farmer teamed with researchers from Iowa State University and the University of Minnesota to conduct a detailed survey of compensation packages used in the US hog industry during 2005.


The data collected allowed the researchers to look at wage differences by job title, education level, region of the country, and experience. The survey also provides insight into the types of benefits and incentives offered to employees. The report also compares wage and benefit rates over time, which provides a view of how employment and compensation trends are emerging within this dynamic sector. For example, the average Midwest hog unit manager received an annual salary of $37,586 in 2005, while the average Midwest farrowing manager received $31, 821. Nationally, about 38 percent of employees were eligible for some type of bonus pay as part of their compensation package, with incentives paid for high rates of pigs weaned per sow per year being the most common target for incentives. Across the nation about 66% of employees in the hog sector report receiving some type of medical insurance as part of their compensation plan, 72% report paid vacation, while 54% report a retirement plan.