From 1977 through April 2019, USDA published monthly season-average price (SAP) forecasts for key agricultural commodities in the form of intervals meant to indicate forecasters' uncertainty but without attaching a confidence level. In May 2019, USDA eliminated the intervals and began publishing a single point estimate--a value that has a very low probability of being realized. We demonstrate how a density forecasting format can improve the usefulness of USDA price forecasts and explain how such a methodology can be implemented. We simulate 21)years of out-of-sample density-based SAP forecasts using historical data, with forward-looking, backward-looking, and composite methods, and we evaluate them based on commonly-accepted criteria. Each of these approaches would offer USDA the ability to portray richer and more accurate price forecasts than its old intervals or its current single point estimates. Backward-looking methods require little data and provide significant improvements. For commodities with active derivatives markets, option-implied volatilities (IVs) can be used to generate forward-looking and composite models that reflect (and adjust dynamically to) market sentiment about uncertainty--a feature that is not possible using backward-looking data alone. At certain forecast steps, a composite method that combines forward- and backward-looking information provides useful information regarding farm-level prices beyond that contained in IVs.

Projections cover agricultural commodities, agricultural trade, and aggregate indicators of the sector, such as farm income and food prices. The projections are based on specific assumptions about macro-economic conditions, policy, weather, and international developments. The report provides a point of departure for discussion of alternative farm sector outcomes that could result under different assumptions. Prospects for the agricultural sector in the near term reflect continuing U.S. and global adjustments to the recession of 2008-09 and the subsequent economic recovery. Long-run developments for global agriculture reflect continued demand for biofuels, particularly in the U.S. and the European Union. Charts and tables.