Forecasting prices at the Dutch flower auctions

Prices at the Dutch flower auctions are Extremely volatile. Price changes o f +/- 20 pm cent one week to the next represents a normal event, and +/- 50 per cent is not uncommon. Since production planning in the flower business offers a complicated variation over the Newsboy Problem, good price foreca sts would improve decision making on space allocation; what species to plan t; the timing of harvesting etc. This paper analyses weekly prices for thre e major species, i.e., roses, chrysanthemums and carnations, 1993-1996. We find that there are strong calendar regularities particularly for roses and chrysanthemums. Establishing a model in which we combine information on se asonal regularities and autoregressive price patterns, we manage to explain a substantial part of the short-term price variability for all three speci es. The model is tested in an out-of-sample dynamic forecasting experiment during the first 35 weeks of 1997.