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Forecasting the world milk and feed prices- looking into the crystal ball
Presentation at the IFCN conference 2015, Kiel
Bjørn Gunnar Hansen, TINE SA
Yushu Li, Norwegian School of Economics
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Several different approaches to forecasting…
or perhaps math?
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Outline
• Research questions
• Material: The IFCN milk and feed prices 2002 - 2014
• Methods
• Results and conclusions
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Reserach questions
• Which price is the most important- feedprice or milkprice?
• How can we forecast the two prices?
• Paper submitted to Agricultural Economics, March 25 2015
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Figure 1. The IFCN world milk and feed prices from Jan. 2002 to Dec. 2014
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Method: Combine three models
• Seasonal autoregressive integrative moving average models (SARIMA)
• Vector error correction models (VECM)
• Wavelet models
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Which price leads?
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….and which price follows ?
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Forecasting 2014
• Training set from 2002 to 2013- validating
• Two accuracy measures of the models- I present the
MAE= |𝜀𝑡𝑇𝑡=1 |/ T
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Use of statistics sometimes can«take off»
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Forecast error, feed price per month USD/100 kg
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Forecast error, milk price per month USD/100 kg
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You may ask: How can I get the figures for 2015……2017?
• I prefer the FIFA method........
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Forecast for 2015 is for free
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Conclusions
• Both price series show increased volatility since 2007- 2008
• Both price series contain business cycles of between two and three years in length, as well as short term cycles of four and eight months
• The two prices are co- integrated • The feed price is the leading variable, the milk
price follows • Combination of the three methods give fairly
good forecasts for a period of one year ahead