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Exercise

How hard is it to forecast commodity prices?

As previously mentioned, making money in commodities is not easy. To see a difficulty in predicting a commodity, you will forecast the price of chicken to five years in the future. When you complete your forecasts, you will note that even just a few years out, the acceptable range of prices is very large. This is because commodities are subject to many sources of variation.

Recall that you previously fit an SARIMA(2,1,0, 1,0,0)12 model to the monthly US chicken price series chicken. You will use this model to calculate your forecasts.

The astsa package is preloaded for you and the monthly price of chicken data (chicken) are plotted on the right.

Instructions

100 XP
  • Refit the SARIMA model from the earlier exercise and convince yourself that it fits well. Check parameter significance and residual diagnostics.
  • Use sarima.for() to forecast the data 5 years into the future.