Name: 
 

2002 State Grain Merchandising Test


Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 
The state that produces the most gross farm income, and probably has the most political clout in Washington, D.C. is;
a.
Illinois
b.
California
c.
Kansas
d.
Texas
e.
Iowa
 

 2. 
The state that usually produces the most wheat each year is:
a.
Illinois
b.
California
c.
Kansas
d.
Texas
e.
Iowa
 

 3. 
The two states that are always at the top of the list for corn and soybean production are:
a.
Illinois & Iowa
c.
Ohio & Iowa
b.
California & Iowa
d.
Texas & California
 

 4. 
The agency that administers US government farm programs is:
a.
FAS
b.
FSA
c.
Farmers Home Administration
d.
ASCS
e.
Farmers Home Administration and ASCS
 

 5. 
LDP stands for:
a.
loan deficiency payment
b.
leader development program
c.
lock, drop, and pull
 

 6. 
A farmer with grain or beans under loan has marketing loan gain when the:
a.
PCP is above the loan rate
d.
all of these are correct
b.
when the PCP is below the loan rate
e.
none of these are correct
c.
when he can collect a LDP
 

 7. 
The current US government farm bill expires:
a.
at the end of 2002
b.
a the end of 2003
c.
at the end of 2004
d.
at the convenience of the President
e.
at the convenience of the Secretary of Agriculture
 

 8. 
The legislation for a new farm program is usually passed by Congress:
a.
the year it takes effect
d.
the year after it takes effect
b.
the year before it takes effect
e.
none of these are correct
c.
two years before it takes effect
 

 9. 
The current government farm program is a:
a.
four year program
c.
six year program
b.
five year program
d.
seven year program
 

 10. 
LDP can be collected on corn, wheat and beans:
a.
the day it is sold
d.
all of these are correct
b.
when in the bin
e.
none of these are correct
c.
when stored at the elevator
 

 11. 
PCP stands for:
a.
pop corn planted
c.
posted county price
b.
posted corn price
d.
none of these are correct
 

 12. 
What major oilseed exporting country has had for months a major financial crisis affecting soybean prices?
a.
Argentina
d.
Brazil
b.
United States
e.
None of these are correct
c.
Canada
 

 13. 
Compared to the US, South American countries produce about what percentage of soybeans?
a.
less then 40%
c.
65%
e.
90%
b.
50%
d.
80%
 

 14. 
What major country entered the WTO in December 2001?
a.
USA
b.
NATO
c.
China
d.
Russia
e.
France
 

 15. 
South American countries are currently completing the harvest of:
a.
a very large soybean crop
b.
a poor soybean crop
c.
an average soybean crop
 

 16. 
This past winter, there were expectations the 2002 US corn crop acres would be increased due to:
a.
lower phosphate costs
c.
lower nitrogen cost
b.
lower potash costs
d.
low herbicide costs
 

 17. 
The seasonal trend for corn and bean prices in March is:
a.
up
d.
there is no seasonal trend
b.
down
e.
none of these are correct
c.
sideways
 

 18. 
The CBOT was founded in:
a.
1964
d.
1620
b.
1848
e.
none of these are correct
c.
1776
 

 19. 
Quantity wise, the contracts traded at the Mid American Exchange are generally:
a.
the same as the CBOT & CME
c.
smaller than the CBOT & CME
b.
larger than the CBOT & CME
d.
none of these are correct
 

 20. 
Soybean options at the CBOT trade in ticks of:
a.
1 cent
d.
1/8 cent
b.
1/2 cent
e.
none of these are correct
c.
1/4 cent
 

 21. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

Putting the wheat on DP and leaving it on DP through January was a:
a.
good decision because he maintained upside potential on basis and futures
b.
poor decision because he had no cash income and accrued additional expenses
c.
poor decision because he made an interest free, unsecured loan to the elevator
d.
inconsequential given what wheat prices did from harvest to February
e.
poor decision because he had no cash income and accrued additional expenses AND poor decision because he made an interest free, unsecured loan to the elevator
 

 22. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

With his beans, he can:
a.
take the LDP any day
b.
put under loan any day
c.
he can take LDP and put the same bushels under loan
d.
he can put some corn under loan and take LDP on the rest
e.
take the LDP any day, put under loan any day, and he can put some corn under loan and take LDP on the rest
 

 23. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

With his beans, he can:
a.
take the LDP any day
b.
remove from under loan any day
c.
he can remove from under loan and take LDP if he does it the same day
d.
he can leave it under loan until the loan matures
e.
remove from under loan any day and he can leave it under loan until the loan matures
 

 24. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

Given what he thinks the bean market will do, he should:
a.
cash contract beans for delivery in early March and set the PCP in late February and buy futures in late February
b.
set the PCP in late February and use up to the sixty days allowed by FSA to pay back the loan at the PCP
c.
sell corn and beans futures in early February and lift the hedge at the end of February, set the PCP on his beans and take the LDP on his corn at the same time
d.
do nothing since the rally in the spring will be far more than the February decline
e.
cash contract beans for delivery in early March and set the PCP in late February and buy futures in late February, set the PCP in late February and use up to the sixty days allowed by FSA to pay back the loan at the PCP, sell corn and beans futures in early February and lift the hedge at the end of February, set the PCP on his beans and take the LDP on his corn at the same time -all these are reasonable choices under the circumstances
 

 25. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

Major mistake(s) he made was:
a.
not taking the LDP on the corn in fall when he could have collected on the weak basis
b.
putting the corn under loan since the PCP was above the loan rate on the first of February
c.
not putting the corn under loan since the PCP was above the loan rate on the first of February
d.
all of these are major mistakes
e.
none of these are major mistakes
 

 26. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

The bean “carry” in the cash market from February to March is:
a.
positive
c.
steady
b.
negative
d.
none of these are correct
 

 27. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

The current cash prices offered for corn is:
a.
above the loan rate
c.
at the loan rate
b.
below the rate
d.
none of these are correct
 

 28. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

The current cash prices offered for soybeans is:
a.
above the loan rate
c.
at the loan rate
b.
below the rate
d.
none of these are correct
 

 29. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

The last day the farmer can put his corn under loan or take LDP is:
a.
May 31st
d.
the same day he prices it
b.
March 1st
e.
none of these are correct
c.
August 31st
 

 30. 
Use the information below to answer this question:

As of last February first, a farmer had 10,000 bushels of beans under CCC loan stored on a farm along with 80,000 bushels of corn that he did nothing with the government marketing programs. He delivered his last year’s wheat crop out of the field to the elevator and put it on a DP contract with 10 cent drop charge plus 3 cents per month. Based upon seasonal trends, he expects corn to decline ten cents and beans to decline 15 to 30 cents in February followed by a very strong rally in March and April, far surpassing the declines in February. His local grain buyer is paying $4.20 for beans delivered in February and $4.18 for beans delivered in March. The same buyer is paying $2.05 for corn delivered anytime in February and March. He is confused about what the price of wheat will do.

The farmer can repay the CCC loan on his beans by:
a.
pay the principle plus interest
d.
all of these are correct
b.
pay at the PCP rate
e.
none of these are correct
c.
forfeit the beans to CCC
 

 31. 
A person with a “short” position benefits when the market moves:
a.
higher
d.
expires
b.
sideways
e.
none ot these are correct
c.
down
 

 32. 
A person would want grains prices to go higher if he had a position such as:
a.
grain stored in the bin unpriced
d.
basis contract at the elevator
b.
short a put option
e.
all of these are correct
c.
long a call option
 

 33. 
A spread position would be:
a.
long May corn, short July corn
b.
long a call, short a put
c.
long a call, long a put
d.
long May corn, short July corn and long a call, short a put
e.
long May corn, short July corn and long a call, long a put
 

 34. 
Initial margin is the amount of money that is:
a.
paid into a brokerage account to maintain a futures position
b.
paid to a grain elevator to establish a DP contract
c.
paid into a brokerage to open the account
d.
paid into a brokerage account to establish a futures position
e.
none of these are correct
 

 35. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

The 13 cents are:
a.
strike price
d.
premium
b.
intrinsic value
e.
none of these are correct
c.
time value
 

 36. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

The 13 cents is the:
a.
strike price
d.
premium
b.
intrinsic value
e.
none of these are correct
c.
time value
 

 37. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

The $4.76 is the:
a.
strike price
d.
premium
b.
intrinsic value
e.
none of these are correct
c.
time value
 

 38. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

The $4.80 is the:
a.
strike price
d.
premium
b.
intrinsic value
e.
none of the above are correct
c.
time value
 

 39. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

The option has no:
a.
strike price
d.
premium
b.
intrinsic value
e.
none of these are correct
c.
time value
 

 40. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

This option expires in:
a.
July
d.
call options do not expire
b.
June
e.
none of these are correct
c.
August
 

 41. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

If the farmer decides to sell this option before purchasing it, technically speaking, she will be a:
a.
seller
b.
buyer
c.
writer
d.
broker
e.
none of these are correct, she can’t do that!
 

 42. 
A farmer is considering buying or selling a July 2002 $4.80 soybean call priced at 13 cents with July beans trading at $4.76.

If she takes a short position with this option, she will:
a.
never have to worry about multiple margin calls
b.
will have only limited loss potential
c.
will have unlimited loss potential
d.
none of these are correct
 

 43. 
If the price a farmer receives is less than the elevators posted price, it typically is because of:
a.
shrink and drying charges
d.
damage
b.
excessive moisture
e.
all of these are correct
c.
too much foreign matter
 

 44. 
Any discounts a farmer is charged for quality problems on cash grain will be reported on a:
a.
transaction sheet
d.
all of these are correct
b.
monthly statement
e.
none of these are correct
c.
settelment sheet
 

 45. 
The test weight for No. 2 corn in pounds per  bushel is:
a.
60
b.
58
c.
56
d.
54
e.
52
 

 46. 
The test weight for No. 2 beans in pounds per bushel is :
a.
60
b.
58
c.
56
d.
54
e.
52
 

 47. 
Grain elevators are regulated by the:
a.
CFTC
d.
USDA
b.
CBOT
e.
none of these are correct
c.
State Department of Agricultures
 

 48. 
They typical soybean crush margin breakeven in cents per bushel is about:
a.
15
d.
45
b.
25
e.
none of these are correct
c.
35
 

 49. 
The USDA generally reports export grain inspections:
a.
every Monday
c.
at the end of the month
b.
every Thursday
d.
never
 

 50. 
The USDA generally reports export grain sales:
a.
every Monday
c.
at the end of the month
e.
daily
b.
every Thursday
d.
never
 

 51. 
The USDA issues Supply and Demand Reports on or about:
a.
the last day of every month
b.
the tenth of every month
c.
the last day of the quarter
d.
as it deems necessary to control prices
e.
as directed by the Secretary of Agriculture
 

 52. 
In July, the seasonal trend for corn and soybeans is:
a.
down
b.
sideways
c.
up
d.
there is no such thing as a seasonal trend
e.
none of these are correct
 

 53. 
The corn and bean markets frequently make their winter lows in:
a.
December
d.
March
b.
January
e.
none of these are correct
c.
February
 

 54. 
The average cost of production for a bushel of beans in the US is:
a.
much less than Brazil
b.
much more than Brazil
c.
about the same as Brazil
 

 55. 
In recent months, the cattle on feed numbers in the US, compared to a year ago, have been:
a.
going down
c.
going up
b.
about unchanged
d.
none of these are correct
 

 56. 
This year’s corn carryout is projected by USDA to be:
a.
several hundred million bushels larger than last year
b.
about the same as last year
c.
several hundred million bushels less than last year
d.
USDA does not make carryover projections
 

 57. 
A grain buyer’s posted cash price is a function of :
a.
futures and basis
c.
futures only
b.
basis only
d.
government regulations
 

 58. 
A basis contract can be:
a.
in place before delivery
b.
in place after delivery
c.
there is no such thing
d.
when the government authorizes it
e.
in place before delivery & in place after delivery
 

 59. 
A forward cash contract:
a.
is in place before the grain is delivered
b.
requires the farmer to have a futrures position
c.
is the same as a Hedge to Arrive Contract (HTA)
d.
is illegal
e.
none of these are correct
 

 60. 
When a farmer delivers grain to an elevator and puts the grain on a Delayed Price Contract (DP):
a.
she has turned title of the grain over to the elevator
b.
receives no money at delivery
c.
has futures market risk
d.
has basis market risk
e.
all of these are correct
 

 61. 
If a farmer expects the soybean futures price to go up and the basis market to firm, she should use which of the following marketing tools?
a.
basis contract
c.
write a call
e.
she should do nothing
b.
forward contract
d.
HTA
 

 62. 
A person who thinks the market price will increase is often referred to as a:
a.
rat
b.
cat
c.
mouse
d.
bull
e.
bear
 

 63. 
During times of war, commodity prices typically:
a.
decline
c.
stay pretty steady
b.
rally
d.
none of these are correct
 

 64. 
The phrase “contract highs” refers to:
a.
forward contracts with a new high basis for the year
b.
the highest price a farmer has grain forward contracted for a given year
c.
highest futures price for a given calender year
d.
highest price of the life of a futures contract
e.
none of these are correct
 

 65. 
An elevator’s “flat” price for corn is $2.10 and new corn is bid at $1.92. Spot corn futures is $2.22; December corn futures are at $2.25. What is the basis for corn delivered today?
a.
-33 cents
b.
+33 cents
c.
+18
d.
+22
e.
-12
 

 66. 
Which of the following are true?
a.
basis is more predictable than the net cash price
b.
basis is more predictable than the futures price
c.
basis is a measure of local supply and demand
d.
basis is determined mathematically: basis=cash price minus futures price
e.
all of these are correct
 

 67. 
The U.S. grows about how many acres of corn each year?
a.
75 to 80 billion
c.
760 to 800
b.
76 to 80 thousand
d.
75 to 80 million
 

 68. 
The number of acres of soybeans grown in the U.S. in the past fifteen years has been:
a.
decreasing
b.
pretty much steady
c.
increasing
 

 69. 
The U.S. corn marketing year is:
a.
January through December
d.
October through September
b.
December through November
e.
none of these are correct
c.
September through August
 

 70. 
The first new crop wheat futures contract month is:
a.
January
d.
December
b.
July
e.
none of these are correct
c.
November
 

 71. 
The first new crop soybean futures contract month is:
a.
January
d.
December
b.
July
e.
none of these are correct
c.
November
 

 72. 
Which of the following are oilseeds?
a.
canola
c.
sunflowers
b.
soybeans
d.
all of these are oilseeds
 

 73. 
Which of the following bought Continental Grain Company a few years ago?
a.
Cargill
b.
Dreyfus
c.
Bunge
d.
Monfort
 



 
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