20 BULLETIN 1351, U. S. DEPARTMENT OF AGRICULTURE 
corresponding index number or by using first differences of the index 
number as a separate variable in the correlation with first differences 
of price uncorrected. This was done in all the correlations men- 
tioned, using either an all-commodity index or a commodity group 
index. 
With no correction for the nonlinear trend in the series of Septem- 
ber prices, 1901 to 1921, the correlation with production plus carry 
over resulted in a coefficient of only —0.43. Dividing the price 
by the Bureau of Labor Statistics index number of all commodities 
for September resulted in a correlation of —0.73. Using first differ- 
ences of this index number as a separate variable, instead of dividing 
the price by the index number, raised the correlation to — 0.S6. 
In this case the latter method gave better results. 
FUTURE PRICES AND CONDITION REPORTS AS PRICE INDICATORS 
During the growing season, when the price forecaster must esti- 
mate supply as well as demand and when the price of oats is being 
influenced by the past year's crop as well as by the crop which is 
maturing, the movement of prices is most difficult to predict. Two 
indicators of price movements are available to farmers during this 
period: (1) The condition reports for the oat crop issued periodically 
by the United States Department of Agriculture; and (2) the price 
of September futures, which represents the best opinion of the gram 
trade as to the probable September cash price. 
The Department of Agriculture issues in the spring a preliminary 
estimate of acreage planted and early in June issues the first of a 
series of monthly condition reports and production forecasts. Early 
in March an estmate of stocks of oats on farms is published. A final 
estimate of acreage, yield, and production is made in December. 
These data are among those used by dealers in oats to estimate the 
probable future prices. 
Future prices are quoted throughout the year for oats to be 
delivered during specified delivery months, usually September, 
December, May, and July. It may thus be said that the oat crop 
is bargained for on the grain exchanges before it is planted, and at 
the time of harvest sales and purchases are made for delivery eight 
or nine months later. The fact that in making these sales for future 
delivery grain men must look ahead and estimate the probable price 
conditions at the date of delivery results in making the prices of 
oat futures an indicator of future cash prices. Just how good an 
indicator they are can be established by correlating future prices 
with cash prices during the corresponding delivery months. 
RELATION OF FUTURE PRICES TO SUPPLY AND TO CASH PRICES 
The quantity of new oats harvested ordinarily determines in large 
measure not only the September cash price of oats but also the Sep- 
tember price of May futures. As compared with the -0.91 correla- 
tion between September cash price and the new supply of oats, the 
correlation between the September price of May futures and the new 
supply of oats is —0.93; that is, prices of May futures are strongly 
influenced by the supply of oats available in September. By May, 
however, the closeness of agreement between cash prices and the 
