Back To School Quiz #4
Welcome to Quiz #4! Ed’s challenging and authentic quiz questions are designed to test your grain marketing knowledge, and will help you learn while having fun! Ed Usset is the author of “Grain Marketing is Simple, It’s Just Not Easy,” and is a grain marketing specialist at the University of Minnesota.
Questions and Answers
- 1.
Let’s assume that you have been aggressively selling futures to price a crop, but you are still less than 100% sold. Today the market trades higher and you get a margin call; has your overall net worth increased or decreased?
- A.
Increased
- B.
Decreased
- C.
No change
Correct Answer
A. IncreasedExplanation
If you are less than 100% sold, your net worth increased with the margin call. The margin calls reminds you that what you’ve already sold was sold too early, but higher prices benefit every unpriced bushel and increase your net worth. I like to tell producers that margin calls are good for hedgers, but not for speculators. I want to thank Jeremy Frost of Midwest Cooperatives in Pierre, SD for suggesting this quiz question.Rate this question:
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- 2.
The rapid growth of grain production in South America has been a big story for several decades. Who produced more soybeans in 2009, the United States, Brazil or Argentina?
- A.
United States
- B.
Brazil
- C.
Argentina
Correct Answer
A. United StatesExplanation
The correct answer is the United States. The question asks who produced more soybeans in 2009, and the United States is known for its significant production of soybeans. This is supported by the fact that the rapid growth of grain production in South America has been a big story for several decades, indicating that the United States has been a major player in this industry.Rate this question:
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- 3.
What is the highest closing price level ever attained by a November (i.e., new crop) soybean futures contract?
- A.
A. $17.24
- B.
A. $17.01¼
- C.
A. $16.73
- D.
D. $16.35½
Correct Answer
D. D. $16.35½Explanation
The highest closing price level ever attained by a November soybean futures contract is $16.35½.Rate this question:
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- 4.
Since 1980, what has been the largest carryout of U.S. corn at the end of a crop year, in terms of a stocks/use ratio?
- A.
97%
- B.
65%
- C.
42%
- D.
29%
Correct Answer
B. 65%Explanation
We ended the 1986/87 crop year with a corn stocks/use ratio of 65%. Persistently large ending stocks in the mid-1980’s led to a number of major policy changes in agriculture. For the record, since 1988 there have been only two years with an ending stocks/use ratio above 20%.Rate this question:
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- 5.
What do you call an options trading strategy involving the simultaneous purchase of an at-the-money call and sale of an out-of-the-money call?
- A.
A. Short straddle
- B.
B. Bull call spread
- C.
C. Long strangle
- D.
D. Call ratio backspread
Correct Answer
A. A. Short straddleExplanation
A bull call spread in options involves the simultaneous purchase of an at-the-money call and sale of an out-of-the-money call. Purchasing an at-the-money call option – the right to buy futures – positions a trader to profit from rising prices. Selling an out-of-the-money call creates a bull spread that lowers the cost of the transaction but also limits the upside potential.Rate this question:
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- 6.
The United States exports about 2 billion bushel of corn each year. Which country or trading bloc is the largest buyer of U.S. corn?
- A.
A. China
- B.
B. European Union
- C.
Mexico
- D.
Japan
Correct Answer
D. JapanExplanation
Answer: Japan is the largest single buyer of U.S. corn, buying 15 mmt each year. South Korea and Mexico are also large buyers of corn from the United States. The European Union is a very small buyer of U.S. corn.Rate this question:
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- 7.
What is the lowest closing price level attained by a December corn futures contract since 1980?
- A.
A. $1.89½
- B.
B. $1.81
- C.
C. $1.63¾
- D.
D. $1.51¼
Correct Answer
D. D. $1.51¼Explanation
Answer: In 1986, the December contract went off the board (i.e., expired) at a price of $1.51¼. For perspective, the December’08 corn contract increased more than $1.50 in an 11-day period in May and June of 2008.Rate this question:
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