The Impact of Public Information on Commodity Market Performance: The Response of Corn Futures to USDA Corn Production Forecasts

This paper examines the impact of the U.S. Department of Agriculture’s (USDA) projections of annual corn output on the price of corn futures. We tested if output projections significantly drive responses to the futures market. We also tested if the accuracy of past projections influences market response to the current projections. For each month—from May (planting month) to October (harvesting month)—we estimated a system of equations representing the daily opening, closing, high-, and low-futures prices. These equations test the forecast’s impacts on both price levels and daily variances. We found USDA’s projection of annual corn production influenced future prices and daily variances. The projection moved the future price closer to the October harvest price, and its impact lingered for several days. We found errors in past output projections have only a small effect on the projection impacts on future prices.