Running a business can be difficult if you don’t know what price you might be able to sell your products for. The Ontario Sheep Marketing Agency (OSMA) turned to Growing Forward 2 (GF2) for funding to develop a price predictor model for the Ontario sheep industry.
The price predictor was developed by the Department of Food, Agricultural and Resource Economics at the University of Guelph, and is focused on predicting the price of lambs, specifically of the 65 – 75 pound category, on the Ontario Livestock Exchange.
Unlike other livestock sectors such as beef and hogs that have futures markets, sheep market pricing relies solely on auction or cash markets to provide pricing for the day lambs are sold.
To build the predictor, researchers estimated a number of statistical models – those typically used in asset pricing and exchange rate modelling – using weekly data from January 1, 2008 onward. The lamb price predictor’s forecast range from one to 52 weeks ahead with confidence intervals illustrating the degree of uncertainty.
The model was tested during the 2015 Easter season, where it predicted prices of $299.40, $297.18, and $298.31 for four, three, and two weeks ahead. A week prior, the prediction was for $326.58 and the final Easter price ended up at $331.74.
Currently, the model is updated weekly and displays predictions from one to four weeks in advance on the website of the University of Guelph’s Institute for the Advanced Study of Food and Agricultural Policy, where it is housed.
Next steps include adding historical information from the United States and New Zealand to help refine prediction results.
More information is available from the Agricultural Adaptation Council at www.adaptcouncil.org. Growing Forward 2 is a federal-provincial-territorial initiative. The Agricultural Adaptation Council assists with the delivery of GF2 programming in Ontario.
Source: AAC