In 2009 ONeil Commodities Consulting conducted a study of so

In 2009 O\'Neil Commodities Consulting conducted a study of soy-bean prices. They concluded that world supply and demand issues play the biggest part in the determination of price. It is the global demand picture that will drive U.S. soybean prices to $8.00 per bushel or to $14.00 per bushel. However, it is the local basis that will determine what proportion of the prevailing price a farmer will receive. This local basis is greatly determined by prevailing local demand and the logistics and transportation cost. It is transportation costs and equipment availability that determine the \"spread\" relationship for local commodities to best potential sale markets and ultimately the relative value of local crop production.

Unusually favorable growing conditions in 2008 and 2009 in Brazil significantly increased the supply of soy beans on the world market. This surplus lowered the price per bushel that U.S. farmers received for their crop. Furthermore, wet conditions and high fuel prices made the 2008 and 2009 crops some of the most expensive crops to plant and harvest in U.S. history.

Even so, it is important to recognize that the U.S. transportation system is the most efficient in the world. According to USDA third quarter 2009 data, a Brazilian farmer in Mato Grosso had to pay an average of $ 100.41/mt to ship his soybeans and corn to export markets. A Brazilian farmer in neighboring Groias state paid $54.03/mt to ship soybeans to the nearest port. By contrast, over the same time frame, it cost U.S. midwestern farmers only $16.57-$18.88/mt to ship to New Orleans by barge and $45.35/mt to ship from Iowa to the PNW. This is a substantial advantage for U.S. farmers.

1. Which of the following factors has the least effect on the pricing of soybeans for the American farmer?

a. Brazilian transportation costs

b. Local demand

c. Global supply

d. United States logistics and transportation costs

e. Global demand

2. Higher crop yields by farmers in Brazil will lead to

a. higher Brazilian crop prices

b. world supple decrease

c. lower American crop prices

d. lower Brazilian transportation costs

e. global demand increase

3. Which issue will increase the income of the American farmer?

a. Lower global demand

b, Increased fuel costs in United States

c. Lower United States transportation costs

d. High Brazilian crop yields

e. Wet conditions in United States

4. When the American farmers earn less for their crop, which element of their local economy is affected the least?

a. Fuel costs

b. Consumer income

c, Employment opportunities

d. Community investment

e. Government tax receipts

5. How can high yields in the Brazilian crop affect your economic situation while attending college?

a. higher wages

b. Increased internship opportunities

c. More college scholarships

d. Increased job security

e. Fewer job openings

Solution

1. Correct option (a) Brazilian Transportation costs

The other factors, some way or the other will affect the pricing directly for American farmers but whatever the transportation cost be in Brazil, it wont affect the pricing in America. It is the transport cost of the country America that will affect their pricing.

2. Correct option (c) Lower American crop prices.

Higher yield in Brazil means, brazilian farmers will start exporting higher number to the global market at a lower price which will eventually lower the price of Soyabean in the global market. A lower price in Global market means, to compete, the US farmers will also have to lower their prices.

3. Correct option (c) Lower United States transportation costs

The other factors will increase the cost of the American farmers and hence, will bring down the income. Lowring the transportation cost will reduce their cost of transport and hence, the overall income will rise.

4. Correct option (c) Employment oppurtunities.

5. Correct option (e) Fewer job openings