Midterm 1 true false

Question 1

True or false The federal government initiated the formation of the pre-cooperatives in the early 1920s including Alberta Saskatchewan and Manitoba pools in response to farmers complaints of the open market system.

Answer 1

False

Question 2

Prior to August 1 2012 not all areas in Canada that produce agricultural crops were within the Canadian we board jurisdiction

Answer 2

True

Question 3

Producers had complaints regarding the prairie green handling system during the 1900 to 1930 period. Producers complained that price-fixing was occurring between grain buyers and improper weighting methods for farmers grain were being used

Answer 3

True

Question 4

Producers had complaints regarding the Prairie grain handling system during the 1900 to 1930 period. Producers complained that the Canadian wheat board was restricting producer freedom and producers choices in marketing their grain

Answer 4

False

Question 5

Under a supply management system Canadian dairy producers will produce the same amount of milk as without a supply management system

Answer 5

False

Question 6

There were a number of requirements that had to be for filled in order to qualify for us to schedule homestead in the late 1800s. They included residing on the same parcel of land for a minimum of six months in each of the first three years. Homesteaders were also required to fence 10 acres of land in the first year, fence an additional 15 acres of land and second year, and fence and additional 15 acres of land in the third year. Each of the subsequent years the fence land had to be utilized for grazing livestock

Answer 6

False

Question 7

The Canadian wheat board operated on a voluntary basis for a number of years prior to becoming compulsory from 1943 to 2012

Answer 7

True

Question 8

Prairie farmers saw a benefit to having government involvement in marketing prairie wheat in the early 1800s as farmers saw real value in the pooling system with an initial and final price system first introduced by the new Canadian Wheat Board as it smoothed out the high and low market prices

Answer 8

True

Question 9

Brazil could potentially increase its total cultivated/cropped land area to an amount similar to or greater than the current United States cropped area

Answer 9

True

Question 10

Under a supply management system consumers will consume less milk and without a supply management system

Answer 10

True

Question 11

Societal resources are allocated more efficiently under a supply management system then without a supply management system

Answer 11

False

Question 12

Canada has seen an increase in the number of dairy farmers with shipments of milk or cream during the past 20 years

Answer 12

False

Question 13

Participation by dairy producers within the supply managed Canadian dairy industry is voluntary just as it is in the Canadian beef and hog in the industry

Answer 13

False

Question 14

Canada has seen an increase in the number of dairy cows during the past 20 years

Answer 14

False

Question 15

Which wheat futures market closely represents the high-quality comedian western red spring wheat that we grow on the Canadian prairies?the …… wheat Futures contract

Answer 15

Minneapolis grain exchange

Question 16

A couple ways to manage risk in agriculture include hedging with futures contracts and vertical integration

Answer 16

True

Question 17

Futures contracts are:

Answer 17

Standardized contracts to make or take delivery of a commodity at a predetermined place and time

Question 18

The fundamental principle underlying hedging is that it involves taking a futures market position opposite to one’s current cash market position

Answer 18

True

Question 19

The premise that makes hedging possible is cash and futures prices move in opposite directions and are regulated by the commodity exchange

Answer 19

False

Question 20

Futures markets are primarily used for…

Answer 20

Price discovery and risk management

Question 21

In the example below who has a higher level of risk the Saskatoon lawyer or the Saskatchewan area farmer?

Answer 21

The Saskatoon area farmer who is just harvested 200 tons of canola and currently has it in the bin improves

Question 22

Speculators facilitate hedging on a commodity futures market by assuming market price risk as well as adding to market liquidity

Answer 22

True

Question 23

If you have a long cash market position you have an prescreen in storage and have not priced it or you are feeding livestock that are on price you are a speculator and are subject to a loss if price declines

Answer 23

True

Question 24

Margin money in the futures market is also referred to as

Answer 24

Performance bond or good faith money

Question 25

You may receive a margin call if

Answer 25

You have a short futures and price increases

Question 26

You may receive a margin call if

Answer 26

Do you have a long futures position and price decreases

Question 27

Futures trading gains credited to a customers margin account can be withdrawn by the customer

Answer 27

As soon as the funds are credited

Question 28

When hedging if you are incurring losses on your futures market position then it is likely that you were incurring gains on your cash market position

Answer 28

True

Question 29

The term basis is…

Answer 29

Most commonly referred to as the difference between the futures price and the local cash price of the underlying commodity it represents

Question 30

With a short hedge you give up The opportunity to benefit from a price increase to obtain protection against a price decrease

Answer 30

True

Question 31

When hedging to use the futures contract month closest to the time but not after you plan to purchase or sell the physical commodity in the cash market

Answer 31

False

Question 32

You need to buy a futures contract before you can sell a futures contract

Answer 32

False

Question 33

A long hedge in the futures market is a commitment to except delivery of a product at a specified price at a specified point in time and most commonly used by users of a product to protect them selves against rising prices

Answer 33

True

Question 34

The…… Of the CME group confirms clears and settles all CME group trades. It also collects and maintains performance bond funds and regulates delivery and reports trading data

Answer 34

Clearing house

Question 35

If the May canola futures are trading at $525 per ton and the current canola cash price is $495 per ton this $30 time basis is referred to as a negative basis or 30 under

Answer 35

True

Question 36

A short hedger benefits from a wide or weakening basis

Answer 36

False

Question 37

A wider or weakening basis will benefit a long hedger

Answer 37

True

Question 38

A farmers crop is currently growing in the field. The farmers cash market position is

Answer 38

Long

Question 39

If you were to sign a deferred delivery contract for 100 tons of canola that you plan to grow in 2018 you are in affect pricing 100 tons of canola now for delivery at a later date

Answer 39

True

Question 40

A study of a domestic and world supply and demand of a commodity is referred to as a… Analysis

Answer 40

Fundamental

Question 41

If the market price of hogs is currently trending downward and all indicators point to the downward price trend to continue the hog market could be viewed as a _______ market

Answer 41

Bearish

Question 42

Institutional risk can be described as risk in agriculture associated with policy and regulatory changes

Answer 42

True

Question 43

The gains and losses on futures positions are settled

Answer 43

Each day after the close of trading

Question 44

The majority of trading in commodity futures markets today is by hedgers including farmers and grain or livestock companies. Speculators only make up a small percentage of commodity futures market trading activity.

Answer 44

False

Question 45

The open interest for the December 2018 corn futures contract trading at the CME group is the sum of all short or long futures contracts are outstanding

Answer 45

True

Question 46

A producer that sell the futures contract protect the price of a physical commodity they are planning to sell at a later time is referred to as a short hedger

Answer 46

True

Question 47

A number of May 2018 lean hog futures contracts transacted during a specified period of time is called the___\__

Answer 47

Trading volume

Question 48

During our discussion of the typical philosophy of selling a farm products we saw that as an agricultural producer it is important to know what your break even prices and to have a target price established. This was important in our discussion of agriculture producers whom we said should set a goal of trying to sell their products that they produce in the bottom 1/3 of the yearly price range.

Answer 48

False