Raghav Goyal and Naveen Adusumilli

Policy decisions that affect producers depend on good data and information. Accurate and timely data is essential for developing effective agricultural policies, which in turn helps farmers make informed decisions about their production and inventory management. In light of this, the U.S. Department of Agriculture (USDA) releases several monthly reports to provide an outlook of demand and supply fundamentals. For example, the World Agricultural Supply and Demand Estimates (WASDE) is a monthly report offering a comprehensive forecast of the supply and demand for major crops globally and in the United States, as well as for U.S. livestock. This report is crucial for farmers, governments and other market participants to understand the fundamental conditions of agricultural commodity markets. Most often, farmers look at these forecasts to decide their production and inventory decisions for the coming marketing year.

To develop these reports, the USDA conducts extensive farmer surveys of over 75,000 farms across the country to gauge their planting intentions and actual plantings. The Agricultural Resource Management Survey is the primary source of information for the USDA on how farms and ranches are faring economically and for their use of resources and agricultural production practices. For the state of Louisiana, the annual Agricultural Resource Management Survey involves gathering data from approximately 400 farmers and ranchers across the state, capturing the information on U.S. agricultural production, welfare of farm households and diverse farm production characteristics.

The output from these and other surveys are fed into the balance sheet forecasts developed by the USDA, which are then used to provide forecasts on agricultural markets. The USDA Economic Research Service uses information from this survey to create the Farm Income and Financial Forecast, Farm Household Income and Characteristics, and Farm Income and Wealth Statistics, and the USDA National Agricultural Statistics Service uses the information to create the Farm Production Expenditures Annual Summary. These forecasts influence the decisions of farmers and businesses along the supply chain.

In the context of Louisiana, where the state is prone to challenges such as droughts and hurricanes, the importance of accurate forecasts becomes even more evident. For instance, consider the drought in 2023 that resulted in $1.69 billion in damages to Louisiana agriculture and forestry. This underscores the critical role played by the USDA projections in helping farmers and stakeholders anticipate and navigate the uncertainties associated with such environmental risks. Accurate forecasts provide early warnings about potential drought conditions, allowing farmers to implement water-saving measures, adjust planting schedules and choose drought-resistant crops. Stakeholders can plan resource allocation more effectively, ensuring that critical support is available when needed. Improved forecasts help the USDA to target assistance programs more accurately, ensuring that disaster relief payments and emergency support reach areas most affected, thereby reducing the overall economic impact. Additionally, accurate surveys and forecasts refine crop insurance models, allowing providers to better assess risk levels and set premiums that reflect actual conditions, thus enhancing the affordability and accessibility of insurance for farmers.

However, much of agricultural economics research suggests that USDA forecasts might not always be perfect. A recent study shows that the forecasts might not be as accurate because it's hard or costly for the USDA to get all the needed information. Therefore, producers must provide as accurate information as possible to USDA surveys. This accurate information will help reduce unwanted or irrelevant information that economists call “noise in the data” and help forecasters make more informed projections about what's going to happen, which is good news for farmers because it helps them make important decisions.

Louisiana’s economy is heavily reliant on agriculture, a fact made clear by substantial cash receipts for agriculture exceeding $3.6 billion. The state stands to benefit significantly from active participation in USDA surveys. A collective effort in providing accurate data can contribute not only to the refinement of forecasts but also to the overall well-being of the farmer economy in the state. Therefore, each farmer's contribution becomes a valuable piece in the larger puzzle of sustaining and improving Louisiana's agricultural landscape.

Looking ahead, there's potential for the USDA to explore and invest in advanced technologies, such as satellites or remote sensing. Incorporating these tools could revolutionize data collection, providing more precise and up-to-date information. This technological leap would not only enhance the accuracy of forecasts but also streamline the survey process, making it more efficient and responsive to the dynamic nature of agriculture.

Raghav Goyal is an assistant professor, and Naveen Adusumilli is an associate professor, both in the LSU AgCenter Department of Agricultural Economics and Agribusiness.

This article appears in the summer 2024 issue of Louisiana Agriculture.

Graphic by Andy Gonzalez