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USDA's Season-Average Commodity Prices

File A2-15
Updated July, 2014

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USDA’s season-average price estimate is a key variable in farm bill programs. Several programs depend on that price to determine farm payments. The season-average price, also known as the marketing year average price, is a price that is meant to represent the average price received by farmers across the na­tion at the point of first sale. This price is across all grades and qualities of the crop and does not include marketing charges. Basically, the idea to compute the price as the total revenue received for selling the crop during the year divided by the total quantity of the crop sold during the year.

table 1The process starts with monthly estimates for state-level commodity prices. USDA’s National Agri­cultural Statistics Service collects sales data from producers. The data collection includes all types of sales. For example, forward contract sales are included in the month that the crop is delivered, not the month the contract is established. The sales data is aggregated to create state-level monthly average prices. The monthly state prices are computed for months when at least 0.5 percent of the state’s an­nual sales occur during the month. These state-level monthly prices are then aggregated to the national level, based on the estimated marketings for each state during the month.

It is these monthly national price estimates that are combined to create the season-average price using monthly marketing weights, i.e. the estimated percentage of the national crop marketed in each month. USDA maintains a 5-year moving average of these marketing weights to use while the marketing year is under way. Once the marketing year is complete, then the actual marketing weights for that year are used to create the final season-average price for that year. Table 1 shows the 5-year moving average marketing weights (based on the 2007-2011marketing years) and the actual marketing weights for the 2012/13 crop year for corn.

USDA publishes the monthly and season-average prices in a number of publications (for example, Agricultural Prices and the World Supply and Demand Estimates report). They have also created season-average price forecast tools for a number of crops. Estimate this year’s price by using the Ag Decision Maker decision tool, “Season Average Price Calculator,” located under Crops - Outlook and Prices.

 

Chad E. Hart, extension economist, Iowa State University, 515-294-9911, chart@iastate.edu