AFM Agricultural Management & Operations 3

Question 1

A farm manager is structuring a lease for a 640-acre row-crop farm. Which lease type transfers the most production risk to the tenant?

Accepted Answer

Fixed cash rent lease

Answer

A fixed cash rent lease requires the tenant to pay a set dollar amount regardless of yield or price, placing all production and market risk on the tenant.

Question 2

Under Generally Accepted Accounting Principles (GAAP) for farms, which inventory valuation method is most common in U.S. agricultural accounting?

Accepted Answer

Lower of cost or market (LCM)

Answer

Agricultural inventory is typically valued at the lower of cost or net realizable value (market), ensuring assets are not overstated on the balance sheet.

Question 3

Which soil health indicator is most directly associated with long-term nitrogen cycling and organic matter decomposition?

Accepted Answer

Soil microbial biomass carbon

Answer

Soil microbial biomass carbon reflects the living microbial community that drives organic matter decomposition and nitrogen mineralization.

Question 4

A farm manager wants to reduce price risk on 50,000 bushels of corn before harvest. Which hedging strategy locks in a minimum price while allowing upside participation?

Accepted Answer

Buy a put option on corn futures

Answer

Buying a put option establishes a price floor while preserving the ability to benefit if cash prices rise above the strike price.

Question 5

When evaluating a livestock operation's feed efficiency, which metric is most commonly used for beef cattle?

Accepted Answer

Feed conversion ratio (FCR) — lbs feed per lb gain

Answer

Feed conversion ratio (lbs of feed per lb of live weight gain) is the standard efficiency metric for evaluating feed utilization in beef cattle.

(AFM) Accredited Farm Manager Certification Practice Test

(AFM) Accredited Farm Manager Certification Practice Test

AFM Agricultural Management & Operations 3