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Quiz #3: Calculating Net Prices through Hedging Strategies in Agricultural Futures

Test your knowledge with Quiz #3 focused on agricultural hedging strategies! This quiz includes four questions related to hedging prices for feeder cattle and wheat futures. You will calculate realized net prices for long and short hedges based on futures prices and local market conditions. Understand how hedge strategies can impact pricing in agriculture by answering questions on local prices and basis values. Challenge your grasp of market dynamics and future forecasts today!

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Quiz #3: Calculating Net Prices through Hedging Strategies in Agricultural Futures

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  1. Quiz #3. • Name and SSN on scan sheets • Questions 1-4: • calculate the net price as a result of hedging

  2. 1. Long Hedge Feb. 4: You plan to buy feeder cattle in May. May futures @ $82.50, Exp. basis is -$1.50 May: Local price is $78.00. May futures @ $78.50 Realized net price paid is: • $79.50 • $81.00 • None of the above

  3. 2. Long Hedge Feb 4: Elevator needs to buy wheat by July. July futures @ $3.50/bu., Exp. basis is -$0.40 June: Local price is $4.50. July futures @ $5.10 Realized net price paid is: • $3.30 • $2.90 • None of the above

  4. 3. Short Hedge. Feb. 4: Plan to sell 40 fed cattle in June June futures @ $68.00/cwt., Exp. basis is +$1.00. June: Local price is $64.50, June futures @ $65.00 Realized net price received is: • $68.50 • $65.50 • None of the above

  5. 4. Short Hedge. Feb. 4: Plan to sell 5000 bu. wheat in July July futures @ $3.00/bu., Exp. basis is -$0.40. July: Local price is $3.70, July futures @ $4.00 Realized net price received is: • $3.40 • $3.75 • $2.70 • $3.00 • None of the above

  6. 5 • The minimum price change on a cattle futures contract is: a. 2 cents per cwt b. 2½ cents per cwt c. 1 cent per cwt d. $1 per cwt • none of the above

  7. For Quiz #4 Gaelic football

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