On the Value of Improved Forecasting for Specialty Crop Producers Through Intra‐Season Supply Allocations

ABSTRACT How to manage harvest and storage of agricultural products has been one of the long‐lasting questions in agricultural economics. We study the value of improved forecast accuracy for the producers in the context of intra‐seasonal supply allocation, particularly for specialty crops with multiple harvest cycles within a season. We first explore how the forecast accuracy affects intra‐seasonal storage decisions. We then derive the expression for the marginal value of the improved forecast accuracy and show that the gains from the improvement in the forecast accuracy occur by shifting the optimal storage choices to those under certainty (i.e., the state is revealed) from those under uncertainty. Finally, we provide numerical illustrations on how the value of the improved forecast accuracy for the producers differs across different degrees of market power showing that relative gains from the improvement are larger when the market is more competitive. We conclude by drawing broader implications highlighting the importance of the interaction among information, storage and market structure.