Final Flashcards
A flour miller concerned about an increase in the price of wheat could hedge by:
a. Taking a long futures position
b. Taking a short futures position
c. Buying a put option
d. All the above
a. Taking a long futures position
In hedging, a -$1.00 basis would occur if:
a. The cash price exceeds the futures price by $1.00
b. The cash price equals the futures price
c. The cash price is below the futures price by $1.00
d. The futures price and options strike price are the same
c. The cash price is below the futures price by $1.00
The market price paid for an option is best defined as:
a. The strike price of the option
b. The option premium
c. The difference between the futures price and option price
d. The time value of the option
b. The option premium
An owner of a $6.00 CALL option on September wheat could:
a. Let the option expire if futures prices go below $6.00
b. Sell the option at its current premium
c. Exercise the option, taking a long futures position on Sep wheat at $6.00
d. Any of the above
d. Any of the above
A cow-calf operator worried about feeder cattle prices going down could reduce price risk by:
a. Selling both a PUT option and a CALL option
b. Taking a short futures hedge position
c. Buying a PUT option
d. Both b and c
d. Both b and c
T/F
Basis is the difference between cash and futures prices and can be either positive or negative.
True
T F
A farmer buying an option pays a fixed cost similar to an insurance policy premium.
T
T F
A hedger locks in a price with the final outcome of that hedge determined by the final basis.
T
T F
In option markets, only one strike price is available for each month a commodity is traded.
F
T F
An option buyer of a $6.00 wheat CALL would make money on the CALL if futures go below $6.00 per bushel.
F
Comparative advantage is generally defined as the ability of one country to carry out a particular economic activity
more efficiently than another country due to its resource endowments.
a. True
b. False
a. True
For U.S. wheat and cattle producers, a weakening U.S. dollar will likely decrease demand from global buyers.
a. True
b. False
b. False
Proven long-term benefits of international trade for agriculture include all of the following except:
a. Opportunity for market expansion and increased demand
b. Increased efficiency and output through global competition
c. Improving international relations by imposing an embargo
d. Higher quality and variety of agricultural products at a lower price
c. Improving international relations by imposing an embargo
In terms of balance of trade, the U.S. has historically maintained a trade surplus in agricultural products.
a. True
b. False
a. True
Mr. Whittig from FGI explained that Canada has secured a larger share of the Chinese market for forage seeds, due
primarily to which of the following factors?
a. A weaker Canadian Dollar
b. Trade tariffs on U.S. agricultural products
c. A weaker U.S. Dollar
d. Both a & b
d. Both a & b
A country’s policy of supporting higher domestic agricultural prices against lower world prices to ensure profitable production prices in an agricultural sector is best defined as:
a. Embargo
b. Export Subsidy
c. Import Tariff
d. Import Quota
b. Export Subsidy
If the Japanese Yen strengthens relative to the U.S. dollar, which of the following statements is true regarding the
impact on trade between Japan and the U.S.?
a. U.S. wheat and beef will now be less expensive to the Japanese consumer
b. Japanese tourists traveling to Hawaii will enjoy a lower cost vacation
c. Tractors produced in Japan will now be more expensive to the U.S. consumer
d. All the above would be true
d. All the above would be true
Import tariffs on a good typically lower the cost of that good to consumers within the country imposing the tariff.
a. True
b. False
b. False
Trade with which of the following two countries has seen rapid expansion under NAFTA?
a. Brazil & Columbia
b. Japan & Canada
c. Canada & Mexico
d. Italy & France
c. Canada & Mexico
A U.S. trade deficit would occur if the U.S. exports $8 bln to Mexico and imports $9 bln of products from Mexico.
a. True
b. False
a. True
A lower-cost shipping alternative that is dependent on U.S. waterway system
Barge
The process of delivering the right product, at the right time, to the right place
Logistics
Highways, railways and facilities serving a transportation system
Infrastructure
Providing lower cost through handling and transporting larger volumes of commodity.
Economies of Scale
The act of a country imposing tariffs to safeguard domestic producers.
Protectionism
A smaller-volume unit designed for transport of consumer goods via vessel or rail.
Container
Defined as cash price minus futures price which also determines a hedging outcome.
Basis
Distribution system utilizing more than one form of transportation.
Multi-Modal
The value of one country’s currency relative to another country’s currency
Exchange Rate
The most critical link in the U.S. transportation system
Truck
Unit-shipments which maximize efficiency by making frequent cross-country trips.
Shuttle Train
Producer marketing alternative implemented to protect against lower prices
Short Hedger
The most expensive component of the U.S. agricultural commodity logistics system.
Transportation
Producer marketing alternative implemented to protect against higher prices.
Long Hedger
Mode of agricultural transportation which provides the lowest per unit cost of shipment.
Ocean Vessel
