Marketing Quiz
What is a Cash Contract?
Legally binding agreement between a producer and a buyer that commits the grower to supply
Legally binding agreement between a producer and a buyer that commits the buyer to supply
Non-legally binding agreement between a producer and a buyer that commits the grower to supply
Legally binding agreement between a elevator and a buyer that commits the grower to supply
What should you do before you sign a cash contract
Hort hedge to protect against futures prices
Read the fine print (terms and conditions
Nothing (make that bread)
Consult a lawyer to go over terms
Contracted MT are always
Gross
Measured by volume
Measured by weight
Net
Do grain companies retain the right to extend a delivery period past the contacted delivery dates for any reason deemed valid
No
Maybe
Yes
Only if deemed crucial
Can Texts, thumbs up phone calls, signature all be used to confirm contract
No
Yes
Nope
Depends on the situation
What's the Difference Between Cash and Futures Contract
Cash contracts facilitate the exchange of physical grain for dollars
Futures contracts payments made once grain delivered and contract fully priced
Futures contracts are an cash market
Cash markets are all about hedging
Spot Price Definition
Avenue for those seeking protection to transfer price risk to others
Locks in a futures price and delivery period for a specific quantity and quality (grade of a specific commodity)
Current nearby futures price and posted basis the moment grain is unloaded
Order placed to sell a certain amount of a specific commodity if the market hits the set price within a pre-set time period
Deferred Delivery Contract
Order placed to sell a certain amount of a specific commodity if the market hits the set price within a pre-set time period
Average of the daily futures settlement prices for a futures reference month over a chosen averaging period
Contract signed to grow a specific commodity and grade for a specific company/end use
Establish a price in advance of delivery – locks in a cash price today for grain delivered in the future
Futures First Contract
Locks in a futures price and delivery period for a specific quantity and quality
Contract signed to grow a specific commodity and grade for a specific company/end use
Average of the daily futures settlement prices for a futures reference month over a chosen averaging period
Order placed to sell a certain amount of a specific commodity if the market hits the set price within a pre-set time period
Basis Contract
Locks in a futures price and delivery period for a specific quantity and quality
Average of the daily futures settlement prices for a futures reference month over a chosen averaging period
Locks in a basis price and delivery period for a specific quantity and quality (grade of a specific commodity)
Order placed to sell a certain amount of a specific commodity if the market hits the set price within a pre-set time period
How many times can you roll a basis contract during the crop year
4
7
2
3
Grain Pricing Orders
Order placed to sell a certain amount of a specific commodity if the market hits the set price within a pre-set time period
Average of the daily futures settlement prices for a futures reference month over a chosen averaging period
Locks in a basis price and delivery period for a specific quantity and quality (grade of a specific commodity)
Contract signed to grow a specific commodity and grade for a specific company/end use
Pooling Contracts
Locks in a basis price and delivery period for a specific quantity and quality (grade of a specific commodity)
Average of the daily futures settlement prices for a futures reference month over a chosen averaging period
Contract signed to grow a specific commodity and grade for a specific company/end use
Locks in a futures price and delivery period for a specific quantity and quality
Production Contracts
Contract signed to grow a specific commodity and grade for a specific company/end use
Average of the daily futures settlement prices for a futures reference month over a chosen averaging period
Locks in a basis price and delivery period for a specific quantity and quality (grade of a specific commodity)
Locks in a futures price and delivery period for a specific quantity and quality
Hedging definition
Trimming the bushes in the garden
Taking an equal but opposite position in the futures market to offset your current position in the physical cash market
Taking an equal but opposite position in the futures market to offset your current position in the digital cash market
Taking an equal but equal position in the futures market to offset your current position in the physical cash market
What does hedging lock in
Space in Bin
Spot price
Futures price
Hedging
What does short hedge protect agaisnt
Price decline
Price increasing
Price staying flat
Price disappearing
What does long hedge protect agaisnt
Price decline
Price increasing
Price staying flat
Price disappearing
What is a cash market
Physical market where commodities (farm production) are bought and sold
Digital market where commodities (farm production) are bought and sold
Where buyers and sellers trade commitments to make or take delivery of commodities in the future
Futures market where commodities (farm production) are bought and sold
What is a futures market
Physical market where commodities (farm production) are bought and sold
Where buyers and sellers trade commitments to make or take delivery of commodities in the future
Digital market where commodities (farm production) are bought and sold
Physical market where commodities (farm production) are bought and sold
What type of market is a futures market
Cash
Digital
Paper
Crop
Are contracts standardized in a futures market
Yes
No
Yes (except for price)
No( except for price)
What is a Long Hedge
A promise to take delivery
A promise to make delivery
A promise to deliver delivery
A promise to never make delivery
Integrity of futures market ensured by
The Government
Clearing houses, threat of taking and making delivery, margin accounts
The market, margin calls, interest rates
Brad
What is a short hedge
A promise to make delivery
A promise to take delivery
A promise to deliver delivery
A promise to never make delivery
Can grain buyers manipulate future prices?
Yes
No
Maybe
Yes but all cool like
What is a carry market
Nearby futures contracts trade at a premium to deferred future months
Where buyers and sellers trade commitments to make or take delivery of commodities in the future
Nearby futures months trade at a discount to deferred future months
Where buyers and sellers trade commitments to make or take delivery of grains in the future
What is an inverse market
Where buyers and sellers trade commitments to make or take delivery of commodities in the future
Where buyers and sellers trade commitments to make or take delivery of grains in the future
Nearby futures months trade at a discount to deferred future months
Nearby futures contracts trade at a premium to deferred future months
What is new crop
Refers to the crop that has already been harvested
Refers to the crop that has not yet been harvested
Refers to the crop that has not yet been seeded
Refers to the crop that has been seeded
What is old crop
Refers to the crop that has not yet been harvested
Refers to the crop that has not yet been seeded
Refers to the crop that has already been harvested
Refers to the crop that has been seeded
What is basis
Indication/expectation of value whereas cash price is the value a physical commodity can be bought/sold at
The difference between a local cash price (cash market) and a nearby futures price
Current nearby futures price and posted basis the moment grain is unloaded
Price offered to producer during physical exchange of underlying commodity
What is cash price
Price offered to producer during physical exchange of underlying commodity
Indication/expectation of value whereas cash price is the value a physical commodity can be bought/sold at
Current nearby futures price and posted basis the moment grain is unloaded
The difference between a local cash price (cash market) and a nearby futures price
What is Spot Price
The difference between a local cash price (cash market) and a nearby futures price
Price offered to producer during physical exchange of underlying commodity
Indication/expectation of value whereas cash price is the value a physical commodity can be bought/sold at
Current nearby futures price and posted basis the moment grain is unloaded
What does wide basis mean
Hold
Sell
Buy
Eject
What does narrow basis mean
Hold
Sell
Buy
Eject
Why Hedge
Protect profit margin and reduce potential of loss, but not necessarily maximize gain
To protect against potential margin calls
To protect against foreign markets
Hedges protect profit declines from rising and rolling cash markets
{"name":"Marketing Quiz", "url":"https://www.quiz-maker.com/QPREVIEW","txt":"What is a Cash Contract?, What should you do before you sign a cash contract, Contracted MT are always","img":"https://www.quiz-maker.com/3012/images/ogquiz.png"}