Earl O. Heady

Expectations and Errors in Forecasting Agricultural Prices

RISK and uncertainty and the quantities which stem from them are phenomena about which relatively little is known. True, a fairly elaborate theoretical groundwork has been laid out in general economics to serve as hypotheses for choice and action by managers and administrators faced with imperfect knowledge. Furthermore, agricultural economists have written long treatises and proposed programs which presuppose basic knowledge of the impact of uncertainty in agriculture. Yet there has been little empirical research describing phenomena and predicting quantities which relate to risk and uncertainty. Only scattered quantitative inferences are available on how the agricultural firm formulates expectations, how planning is carried on in light of these expectations, and how uncertainty results, ex post, in inefficient use of resources. More research in these areas is needed.