Pre-harvest price expectations for corn: The information content of USDA reports and new crop futures

This article examines the puzzle of why futures prices continue to react to USDA crop reports despite the fact that reports appear to be no longer newsworthy, that is, provide no better production estimates than private forecasts. The information value of reports is measured in terms of their influence on rational agents' harvest-time corn price expectations, which are uncovered using a Hamilton-type modeling approach. Results show that reports are still newsworthy, as they would contribute to agents' price expectations if released a day early. Thus futures price reactions, which closely reflect price expectations, are rational and consistent with efficient markets hypothesis.