Back To School Quiz #4

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.

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.

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.

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%.

The highest closing price level ever attained by a November soybean futures contract is $16.35½.

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.

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.