2012 DISTRICT FFA FARM MANAGEMENT CONTEST
Multiple Choice Section
1. A farmer purchases 500-pound feeder steers for $1.70 per pound and plans to sell the steers
at 750 pounds. The farmer estimates the total cost of gain to be 94 cents per pound. The
nearest breakeven price when the steers are sold at 750 pounds is
A. $120.46/cwt.
B. $131.33/cwt.
C. $141.16/cwt.
D. $144.67/cwt.
E. None of the above
2. If grain sorghum has 97% of the feeding value of corn on a pound-for-pound basis and corn
is selling for $6.55 per bushel, then a hundredweight of grain sorghum is worth
A. $6.35
B. $6.75
C. $11.35
D. $12.26
E. None of the above
3. Corn has an expected yield of 160 bushels per acre and a production cost of $400.00 per
acre. Expected market prices are $6.00 per bushel for corn and $12.00 per bushel for
soybeans. Soybeans can be raised at a production cost of $150 per acre. At what breakeven
yield per acre would soybeans generate the same net return per acre as corn?
A. 45.3 bushels
B. 50.3 bushels
C. 56.7 bushels
D. 59.2 bushels
E. None of the above
4. A soybean producer decides to store his soybeans in the local elevator for 4 months. The
price at harvest is $11.00 per bushel and the elevator charges 2 cents per bushel per month
for storage plus a 5 cents per bushel handling charge. He has 5,000 bushels to sell and must
borrow $55,000 at 8% annual interest while he stores the soybeans. What price must he
receive for his soybeans to break even and cover his storage and opportunity costs?
A. $11.12
B. $11.07
C. $11.44
D. $12.86
E. None of the above
5. How many pounds of 48% protein soybean meal must be mixed with 8% protein corn to
make a ton of 15% protein feed?
A. 263 pounds
B. 350 pounds
C. 389 pounds
D. 427 pounds
E. None of the above
6. How many total acres are included in the "S 1/2 of the NW 1/4 and W 1/2 of the NE 1/4 of
the SW 1/4 of Section 15, Twp. 10N, R4W of the 5th Principle Meridian"?
A. 80 acres
B. 100 acres
C. 120 acres
D. 160 acres
E. None of the above
7. How much perimeter fence would be required to completely enclose the parcel of land
described in the question above?
A. 1.5 miles
B. 2.0 miles
C. 2.5 miles
D. 3.0 mile
E. None of the above
8. A acre equals
A. 0.40 hectares
B. 0.74 hectares
C. 2.47 hectares
D. 5.05 hectares
E. None of the above
9. A farmer who wants a real rate of return on his investment of 5% will use what discount rate
if he anticipates inflation of 3% per year?
A. 2%
B. 3%
C. 5%
D. 8%
E. None of the above
10. An decrease in the rate of inflation, everything else equal, will have what impact on the
present value of a future stream of income?
A. No impact
B. Increase the present value
C. Decrease the present value
D. Cannot tell
E. None of the above
11. The process of finding the present value of a dollar to be received in the future is known as
A. compounding.
B. discounting.
C. forwarding.
D. ratio analysis.
E. None of the above
12. A farmer placed too high a value on his land in his closing inventory while all other records
were accurate. Net working capital in his record summary is
A. too high.
B. too low.
C. not affected.
D. fixed.
E. None of the above
13. When the size of the soybean harvest exceeds locally available farm and elevator storage,
what happens to the basis?
A. Basis narrows.
B. Basis widens.
C. Basis goes out of existence.
D. Basis is usually the same all year long.
E. None of the above
14. The short-run supply curve for a firm is identical to
A. average variable cost.
B. average fixed cost.
C. average total cost.
D. marginal cost.
E. None of the above
15. A farm business with declining average total costs has
A. increasing returns to size.
B. decreasing returns to size.
C. constant returns to size.
D. decreasing demand.
E. None of the above
16. Other things equal, the value of land will be greatest to the farmer who has the
A. longest planning horizon.
B. shortest planning horizon.
C. highest discount rate.
D. lowest discount rate.
E. None of the above
17. A farmer has total assets of $600,000 of which land is $300,000. The farmer’s debt:equity
ratio is 0.5. What will the farmer’s debt:equity ratio be if the lender devalues the land by 10%?
A. .588
B. .701
C. .843
D. .901
E. None of the above
18. For the rules of depreciation, which of the following is an example of "listed property"?
A. A home
B. A raised cow
C. A greenhouse
D. A passenger car
E. None of the above
19. An LLC (Limited Liability Company) is usually
A. taxed like a corporation.
B. taxed like a partnership.
C. not for profit and therefore not taxed.
D. illegal in Missouri.
E. None of the above
20. A farmer should issue an IRS Form 1099 for which of the following?
A. $750 paid to a neighbor for hay.
B. $500 paid to a neighbor for custom work.
C. $1500 paid to a neighbor for a bull.
D. $650 paid to a neighbor for land rent.
E. All of the above
21. When required, you must send an IRS Form 1099-MISC to IRS before
A. December 31.
B. January 31.
C. March 1.
D. April 15.
E. 90 days after payment.
22. The IRS form used to calculate self-employment tax is
A. Schedule D.
B. Form 4797.
C. Form 4562.
D. Schedule SE
E. None of the above
23. The USDA agency that administers the federal crop insurance program is the
A. Farm Service Agency
B. Risk Management Agency
C. Farm Crop Insurance Agency
D. Rural Development Agency
E. None of the above
24. Which is not a policy plan for multi-peril crop insurance?
A. Revenue Protection
B. Yield Protection
C. Management Protection
D. Revenue Protection with harvest price exclusion
E. None of the above
25. On a crop insurance policy, APH stands for
A. Adjusted Protection History
B. Accumulated Price History
C. Approximate Policy Hierarchy
D. Actual Production History
E. None of the above
26. What type of insurance protects the farmer from lawsuits if he/she is responsible for personal
injury or property damage to another person?
A. Life insurance
B. Property insurance
C. Accident insurance
D. Liability insurance
E. None of the above
27. Even though corn prices are at record levels, corn farmers still receive from USDA
A. direct payments.
B. loan deficiency payments.
C. counter-cyclical payments.
D. acreage protection payments.
E. None of the above
28. You are considering the purchase of a used combine, rather than continuing to hire a custom
operator at $24.00 per acre. If you purchase the machine, the annual fixed costs (interest,
depreciation, etc.) will be $20,000. The variable cost is $12 per acre including the extra labor.
There would be no other changes in costs and returns associated with ownership and no savings
other than the custom charges. How many acres must be harvested each year in order to justify
(on a breakeven basis) purchasing the combine?
A. 833.3
B. 1,000
C. 1,250
D. 1,667
E. None of the above
29. Which of the following should not affect a farmer’s decision to store his crop?
A. Interest rates
B. Shrinkage during storage
C. Anticipated price in the future
D. What he paid for his grain bin
E. None of the above
30. On April 1, 2011, Janice borrowed $10,000 to plant corn. On November 1, 2011, she repaid
the $10,000 along with $418.25 interest. What annual interest rate did she pay?
A. 7.17%
B. 10.75%
C. 12.25%
D. 14.34%
E. None of the above
Use the following information to answer questions 31-34
A farmer can produce a crop under contract and be guaranteed a return of $95 per acre. If he does
not produce the crop under contract, there is a 50% chance he will make $150 per acre and a 50%
chance he will make only $60 per acre.
31. What are his expected returns per acre if he produces all the crop under contract?
A. $95
B. $100
C. $105
D. $150
E. None of the above
32. What are his expected returns per acre if he produces half the crop under contract and half the
crop without a contract?
A. $100
B. $105
C. $110
D. $150
E. None of the above
33. What are his expected returns per acre if he produces all the crop without a contract?
A. $100
B. $105
C. $110
D. $150
E. None of the above
34. A farmer who prefers to produce all his crop under contract would be considered
A. risk averse.
B. risk neutral.
C. risk loving.
D. risk indifferent.
E. None of the above
35. The returns for a farmer who produces his crop under a contract as compared to a farmer who
produces none of his crop under contract would be
A. more variable.
B. less variable.
C. always higher.
D. always lower.
E. None of the above
36. For an amortized loan, the amount of interest in the first payment will be
A. more than the amount of the principal.
B. less than the amount of the principal.
C. equal to the amount of the principal.
D. dependent on the length of the loan.
E. None of the above
37. Crop prices increase, causing Marcia’s sales income to increase while leaving her cash
operating expenses unchanged. This will cause her capital turnover to
A. increase.
B. decrease.
C. not change.
D. Any of the above
E. None of the above
38. Average corn yields have historically increased at an annual rate of 2%. If the current average
is 160 bushels per acre, what do we expect the average yield will be in 5 years if it continues to
grow at this rate?
A. 165.0 bushels
B. 165.6 bushels
C. 167.3 bushels
D. 173.2 bushels
E. None of the above
39. What would you expect average corn yields to have been 4 years ago? (see Quest. 48)
A. 131.8 bushels
B. 134.7 bushels
C. 135.0 bushels
D. 147.8 bushels
E. None of the above
40. The carcass weight of a hog usually averages 76% of the live weight at the time of slaughter. If
it costs 65 cents per pound to raise a hog to slaughter, what is the breakeven carcass price?
A. $61.80/cwt.
B. $68.20/cwt.
C. $72.37/cwt.
D. $85.53/cwt.
E. None of the above
2012 DISTRICT Problems Section
PROBLEM I - Market Value Balance Sheet
Using the information below, complete the net worth statement for January 1, 2012:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $470,000
House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . 85,000
Cows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,000
Calves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100
Autos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,000
Sows and boars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,000
Market hogs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Checking and savings . . . . . . . . . . . . . . . . . . . . . . . . . 6,090
Corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Hog buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Feed and hay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 500
Accrued interest owed . . . . . . . . . . . . . . . . . . . . . . . . . 14,740
Accrued taxes owed . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500
30-year land loan balance is $188,000.
$8,950 plus interest is due March 1 of each year.
7-year tractor loan balance is $8,912.
$2,971 plus interest is due November 30 of each year.
15-year home loan balance is $52,800.
$400 plus interest is due each month.
Current Assets:
Current Liabilities:
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
Total _________________ Total __________________
Non-current Assets:
Non-current Liabilities:
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
________________________________ __________________________________
Total ________________ Total __________________
Total Assets _________________ Total Liabilities __________________
Net Worth _________________
Questions 1 through 7 refer to PROBLEM I
1. The total value of current assets on January 1, 2012, was
A. $49,590
B. $67,590
C. $83,590
D. $88,260
E. None of the above
2. The total value of non-current assets was
A. $728,000
B. $779,000
C. $797,000
D. $831,000
E. None of the above
3. The total value of current liabilities was
A. $25,340
B. $37,661
C. $42,061
D. $52,550
E. None of the above
4. The total value of non-current liabilities was
A. $232,991
B. $237,391
C. $240,172
D. $249,712
E. None of the above
5. The net worth was
A. $502,480
B. $519,780
C. $775,938
D. $828,590
E. None of the above
6. The debt-to-equity ratio was
A. 0.50
B. 0.85
C. 1.18
D. 1.96
E. None of the above
7. The net working capital was
A. $7,529
B. $11,929
C. $49,590
D. $553,538
E. None of the above
PROBLEM II -- Enterprise Budget
Use the dairy cow budget on the next page to answer Questions 8 through 16.
8. Total operating cost per cow is:
A. $512.70
B. $1,087.09
C. $3,437.11
D. $4,524.20
E. None of the above
9. The return above total operating cost per cow is:
A. $512.70
B. $1,087.09
C. $3,437.11
D. $4,524.20
E. None of the above
10. How many hours of labor are budgeted per cow?
A. 10.69
B. 43.40
C. 60.36
D. 72.13
E. None of the above
11. If each cow is milked for 305 days, how many pounds of milk are given per cow
per day on average?
A. 8.46
B. 12.90
C. 65.57
D. 200.00
E. None of the above
12. What is the total budgeted interest cost per cow?
A. $82.29
B. $226.80
C. $309.19
D. $429.19
E. None of the above
13. What price per pound is paid for hay?
A. 2.66¢
B. 4.75¢
C. 5.59¢
D. 7.50¢
E. None of the above
14. What interest rate is used in this budget?
A. 6.7%
B. 7.5%
C. 8.0%
D. 10%
E. None of the above
15. If all feed costs are increased by 20%, what will be the total returns per cow above
all costs?
A. -$294.78
B. +$48.81
C. +$123.57
D. +$287.71
E. None of the above
16. If all feed costs are increased by 20%, what milk price will cause the returns above
all costs to equal zero?
A. $15.26/cwt.
B. $18.78/cwt.
C. $19.05/cwt.
D. $19.22/cwt.
E. None of the above
________________________________________________________________
DAIRY COW REPLACEMENTS IN 100 COW HERD
22,000 pounds of milk sold per year per cow unit
39% replacement rate
Operating Inputs
Promotion assess
Milk hauling
Dairy ration, 16%
Hay
Salt & minerals
Milk replacer
Calf starter
Pasture
Breeding fees
Vet medicine
Supplies
Accounting
Utilities
Machinery labor
Equipment labor
Livestock labor
Mach fuel, lube, repair
Equip fuel, lube, repair
Total Operating Costs
Units
Cwt
Cwt
Cwt
Tons
Lbs
Lbs
Lbs
AUMS
Dol
Dol
Dol
Hd
Dol
Hr
Hr
Hr
Fixed Costs
Machinery
Interest @ 10%
Depr, taxes, insurance
Equipment
Interest @ 10%
Depr, taxes, insurance
Livestock
Dairy cow, 22,000
Dairy heifer, 22,000
Dairy repl. heifer 22,000
Interest @ 10%
Total Fixed Costs
Production
Milk
Dairy cows
Dairy bull calf
Dairy heifers
Total Receipts
Units
Cwt
Cwt
Hd
Cwt
Price
0.35
0.57
12.70
150.00
0.15
0.85
0.15
20.00
25.00
52.00
39.00
18.00
47.00
10.00
10.00
10.00
Quantity
220.00
220.00
108.67
5.59
130.00
5.00
50.00
3.48
1.00
1.00
1.00
1.00
1.00
10.69
6.27
43.40
Value
77.00
125.40
1380.11
838.50
19.50
4.25
7.50
69.60
25.00
52.00
39.00
18.00
47.00
106.90
62.70
434.00
102.91
27.74
3437.11
__________________________________________
Amount
Value
471.17
47.12
64.98
552.75
55.27
80.22
1875.00
820.00
573.00
3268.00
326.80
574.39
___________________________________________
Price
Quantity
Value
19.00
220.00
4180.00
55.00
4.44
244.20
200.00
0.48
96.00
100.00
0.04
4.00
4524.20
___________________________________________
Returns above total operating costs
Returns above all specified costs
_________________________________________________________________
1087.09
512.70
PROBLEM IV -- Supply and Demand
The above graph represents supply of apples for import into the U.S. (SF) the supply of
apples produced in the U.S. (SUS), the total supply of apples in the U.S. (ST), the foreign
demand for U.S. apples (DF), the domestic demand for apples (DUS), and the total demand
for apples (DT) in the U.S.
23. What is the market equilibrium price of apples in the U.S.?
A. P1
B. P2
C. P3
D. P4
E. None of the above
24. At the market equilibrium price, how many apples will be exported from the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how many apples will be imported into the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. At what price would apple imports equal apple exports?
A. P1
B. P2
C. P3
D. P4
E. None of the above
For questions 27 and 28, assume the value of the U.S. dollar weakens with respect to the
currency of our major apple trading partners.
27. The change will cause the U.S. apple imports to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. After the dollar weakens, U.S. equilibrium price of apples should
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
On November 10, a farmer has 5,000 bushels of corn in his bin. He sells it on February
15. Ignore commissions, storage cost, and interest.
November 10 quotes:
March futures price = $5.70
Expected basis = $0.10 under the board
Strike
price
$5.20
$5.30
$5.40
$5.50
$5.60
$5.70
---- Premiums ---Call
Put
$0.73
$0.01
$0.63
$0.02
$0.53
$0.03
$0.43
$0.08
$0.33
$0.15
$0.24
$0.24
February 15 quotes:
March futures price = $5.75
Basis = $0.05 under the board
---- Premiums ---Call
Put
$0.58
$0.01
$0.48
$0.02
$0.38
$0.04
$0.28
$0.11
$0.19
$0.19
$0.12
$0.29
29. What is the cash price of corn on February 15?
A. $5.65
B. $5.70
C. $5.75
D. $5.80
E. None of the above
30. If the farmer sold a futures contract on November 10 and bought back the contract
on February 15, what would be the realized price per bushel (cash + net on futures)
for the corn?
A. $5.65
B. $5.70
C. $5.75
D. $5.80
E. None of the above
31. If the farmer bought a $5.50 Put on November 10 and sold the Put on February 15,
what would be the realized price per bushel (cash + net on options) for his corn?
A. $5.62
B. $5.67
C. $5.68
D. $5.73
E. None of the above
32. If the farmer bought a $5.50 Put and sold a $5.50 Call on November 10, and sold
the Put and bought back the Call on February 15, what would be the realized price
per bushel (cash + net on options) for his corn?
A. $5.52
B. $5.78
C. $5.83
D. $5.88
E. None of the above
33. Given all the information above, which of the following actions taken on
November 10 turned out to be the most profitable?
A. Selling a futures contract.
B. Buying a $5.50 Put option.
C. Buying a $5.50 Put and selling a $5.50 Call.
D. Selling the corn on November 10.
E. Taking no market action.
PROBLEM VI - Time Value of Money
Use the following information to answer Questions 34-40.
N
1
2
3
4
5
6
Present
Value of
a $1
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
Future
Value of
a $1
1.0600
1.1236
1.1910
1.2625
1.3382
1.4185
Present
Value of
Annuity
0.9434
1.8334
2.6730
3.4651
4.2124
4.9174
34. What is the present value of a dollar to be received in 4 years?
A. 74.73 cents
B. 79.21 cents
C. $1.26
D. $3.47
E. None of the above
35. A field of alfalfa will produce $1,000 during the first year, $2,800 during each of the
next 4 years and $2,000 in the sixth year. To the nearest dollar, what is the present value
of this income stream?
A. $10,431
B. $11,507
C. $12,301
D. $13,104
E. None of the above
36. A beef cow produces after-tax returns at the end of the year of $140/year for 5 years and
can be sold for $800 after-tax at the end of the fifth year. Assume the above table uses
the appropriate discount rate and determine the current value of the cow to the nearest
dollar.
A. $590
B. $594
C. $598
D. $1,188
E. None of the above
37. With one year of income remaining in the beef cow in Question 42, how much should
she be worth, to the nearest dollar, using the above tables?
A. $406
B. $443
C. $721
D. $887
E. None of the above
38. If the farmer expects interest rates to increase, but no change in net returns to cattle, what
impact is this likely to have on the present value of the beef cow?
A. Decrease the present value
B. Increase the present value
C. Would not change the present value
D. Cannot tell
39. What is the annual payment on a $20,000 loan amortized over 5 years?
A. $4,747.89
B. $5,244.94
C. $5,771.84
D. $5,904.58
E. None of the above
40. What discount rate is used in the table for this problem?
A. 5.0%
B. 6.0%
C. 6.5%
D. 7.0%
E. None of the above