Summary: This is the last of three GAO reports on the accuracy of U.S. Department of Agriculture (USDA) forecasts. Previous studies looked at the accuracy of USDA's meat and budget commodity forecasts. (See GAO/PEMD-91-16, May 6, 1991, and GAO/PEMD-91-24, Aug. 13, 1991.) This report focuses on (1) the accuracy of the Federal Crop Insurance Corporation's (FCIC) independent price forecasts, (2) the effect of these inaccuracies on program costs, and (3) how FCIC can improve its forecast accuracy. GAO found that FCIC's corn, wheat, and soybean price forecasts exhibit large bias errors exceeding those of other available forecasts and that FCIC would have spent about $194 million less than it did if it had used the forecasts made by the World Agricultural Outlook Board during crop years 1983 to 1989. GAO identified other forecasting and program costs issues affecting the actuarial soundness of the program. These include (1) forecasts being made earlier in the crop year than necessary, leading to potentially larger errors; (2) the lack of an effective management process for evaluating forecast accuracy and methods; (3) the failure to adjust national program price selection options when information on local price variations can be used; and (4) the failure to deduct harvest costs when total crop losses occur.
