True/False
Indicate whether the sentence or statement is true or
false.
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| 1. | A hedger is one who takes risk
positions in the futures market with the hope of making a profit.
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| 2. | The term ‘basis’ is
referred to as the difference between the price of cash grain at the local elevator and a designed
monthly futures price.
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| 3. | When weighing grain, tare is
the difference between the weight of the truck when empty compared to the weight of the truck when
loaded with grain.
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| 4. | Because of State law, all
elevators must discount the same amount for removal of moisture.
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| 5. | On-farm storage of grain
includes additional risks as well as extra costs compared to cash sale at harvests.
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| 6. | When a farmer desires to hedge
his or her grain, the usual transaction is to first sell futures contracts and later in the marketing
season buy these contracts and sell the grain for cash, at that time.
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| 7. | A basis contract guarantees a
certain price at delivery time.
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| 8. | When forward contracting grain,
the producer must sell in 1,000 or 5,000 bushel units.
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| 9. | When using delayed price as a
method of selling grain, the soundness and integrity of the elevator is of utmost
importance.
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| 10. | Feeding livestock is a method
of marketing corn.
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Multiple
Choice
Identify the letter of the choice that best completes the statement or answers the
question.
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| 11. | When the quantity demand for a
product remains somewhat the same even though the supply goes up or down, the demand for these
products is said to be a. | Elastic | b. | Inelastic | c. | Bullish | d. | Bearish | | | | | | | | |
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| 12. | A ‘bear’ is the
term for an individual who: a. | Speculates in the market
| c. | Hedges market transactions | b. | Expects the market to go
down | d. | Expects the market to go up | | | | |
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| 13. | A load of grain having 24.5%
moisture weighs 13,680 ponds. If the percent shrinkage used to dry it to 15.5% moisture is 13.2, the
pounds of dried grain calculated in the load at 15.5%moisture is: a. | 12,154.7 | b. | 11,874.2 | c. | 10,328.4 | d. | 13,680 | | | | | | | | |
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| 14. | If March soybean futures close
at $5.40 on October 20, and the usual basis of soybeans is .28 cents in March, the equivalent cash
price of soybeans in March is a. | $5.12 | b. | $5.68 | c. | $5.40 | d. | $6.36 | | | | | | | | |
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| 15. | If the July corn futures close
in November 1 at $2.88, the cash price of corn on November 1 is $2.30 and the usual basis for July is
.26 cents, the predicted returns per bushel to be gained for storage from July to November would
be a. | 23 cents | b. | 58 cents | c. | 32 cents | d. | 55 cents | | | | | | | | |
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| 16. | A farmer chooses to make
arrangements during the growing season with the local elevator for that elevator to guarantee a
specified market price upon delivery of 2,300 bushels of grain on a future date during the harvesting
season. the farmer is making use of the marketing method that is a. | Hedging in futures | c. | Illegal in Ohio | b. | Forward contracting | d. | Unattractive to credit agencies | | | | |
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| 17. | The futures market provides a
grain producer an opportunity to ‘price’ his grain a. | One day prior to harvest | c. | Prior to or after production | b. | Any time in the future | d. | 5 years prior to production | | | | |
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| 18. | Demand for grain is affected
by a. | Weather | d. | All of these are correct | b. | Exports | e. | Both weather and
exports | c. | Livestock numbers | | | | |
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| 19. | A warehouse receipt is
generally used for a. | storing grain at the elevator to later
feed the livestock | b. | picking up grain bin
supplies | c. | storage of grain by a farmer needing a negotiable instrument as
security | d. | Soil Conservation Service grain | | |
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| 20. | The ‘board price’
for corn, unless otherwise indicated, is stated for a. | U.S. No. 1 | c. | U.S. No. 3 | b. | U.S. No. 2 | d. | U.S. Sample
Grade | | | | |
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| 21. | The weight loss of grain
resulting from grain being dried down from a higher moisture level is referred to as a. | Basis | b. | Net weight | c. | Chaff | d. | Shrinkage | | | | | | | | |
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| 22. | A fee charged by a brokerage
house for completing a buying and selling transaction is called a. | Commission | c. | Load in - load out charges | b. | Interest | d. | Margin | | | | |
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| 23. | Ordinarily, the
elevator’s highest grain discount is for a. | excess foreign
material | c. | Excess moisture | b. | Low test
weight | d. | Excess shrunken and broken kernels | | | | |
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| 24. | If Farmer Jones has 1,000
bushels of corn on storage valued at $2.00, what is his interest cost per bushel for storing this
corn for 6 months at an 8% interest rate? a. | 12 cents | b. | 24 cents | c. | 16 cents | d. | 8 cents | | | | | | | | |
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| 25. | The transportation and
handling, and interest and storage costs between a local market and Chicago equals a. | Cash price | b. | Futures price | c. | Delayed price | d. | Basis | | | | | | | | |
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