1. Paul D. Mitchell Fall 2014 Monday Dec 15, 2014 10:05 AM – 12:05 PM Animal Science 212 AAE 320 Final Exam Review

2. Goal Explain what to expect for final exam Overview new topics since last exam Idea of how to study

3. Study Aids Overheads, Think Breaks Course Readings: Fact Sheets, Extension Presentations etc. Problem Sets Exams taken this year Old Exams Expect this year’s final to be similar to, but not exactly the same as, previous finals

4. Course Overview IntroductionExam 1 Production EconomicsExam 1 Farm FinanceExam 2 Taxes and Business ArrangementsExam 2 Ag Policy Commodity Programs Crop Insurance Special Topics Technological Change Sustainability New

5. New Topics: Ag Policy Commodity Programs Crop Insurance Special Topics Technology Change Sustainability

6. Commodity Support Programs Know basic idea of how each works Price Loss Coverage (PLC) Agriculture Risk Coverage (ARC) Marketing Assistance Loans (MAL) and Loan Deficiency Payments (LDP) Supplemental Coverage Option (SCO) Dairy Margin Protection What triggers a payment for each? Given formula and values, calculate payment How payment changes under different circumstances

7. Commodity Support Programs Terms to know: Base Acres, Payment Yield, Reference Price, County Revenue Guarantee, Loan Rate, National Marketing Year Average Price, Posted County Price Review initial slides for major stylized facts about commodity support programs Good for true/false & short answer questions Stylized facts about ag subsidies from early notes on commodity support and Farm Bill For ARC, do not worry about details like how to calculate yield guarantee, just how it works

8. Crop Insurance Crop Insurance Programs Yield vs. Revenue Insurance Coverage Individual vs. Area-wide Coverage YP, RP, GRP, GRIP RP with harvest price exclusion CAT Coverage Level, Price Election, Unit Structure Supplemental Coverage Option (SCO) What triggers indemnities? How to calculate payments

9. Crop Insurance Crop insurance subsidies and premiums What subsidization of premiums means What is the Loss Ratio and implication for farmers Commodity program and crop insurance slides for crop insurance stylized facts Other crops, LGM Dairy, Typical WI practices Good for true/false & short answer questions Where do you buy insurance?

10. Special Topics: Technology Change and Sustainability What we talked about in class based on power points and materials posted Read overheads and think about what we talked about in class Skim readings Short answer, true false, multiple choice

11. Technology Change Historical data on agricultural productivity, crop prices and farm income in USA (stylized facts) Effect of technology change on crop prices: Can you explain what makes price increase and decrease? What do the data show (stylized facts) What is Cochrane’s Treadmill? How does ag technology change affect farmers, farm income, and farm size? How does ag technology change affect consumers? What do the data show (stylized facts) What do current farm household income data show? Where do farm subsidies fit in? What are some strategies for farmers to deal with technology change?

12. Sustainability Three parts (people, profit, and planet) Life Cycle Assessments (LCA) What farmers typically do for current tools/assessments: Cool Farm Tool, Fieldprint Calculator, NISA Self-Assessment Measurement problem: Frontiers of Sustainability What do consumers think?

13. Key Concepts to Know: Exam 1 Optimality conditions How much input to use Value of Marginal Product = Input Price How much output to produce Output Price = Marginal Cost Able to apply in table and calculus formats Nothing more than single input production

14. Key Concepts to Know: Exam 1 Average Cost, Marginal Cost, Total Cost Calculations in table formats and relationships Opportunity Cost and Economic Profit What is it, how to interpret Be able to apply these concepts in context of problems, as well as short answer See 1 st Exam and problem sets this year, old final exams Miscellaneous (non-quantitative) topics Wisconsin Ag, strategic management, etc.

15. Key Concepts to Know: Exam 2 Depreciation Methods Straight Line, IRS Method Financial Analysis Use Balance Sheet and Income Statement to calculate and interpret ratios, returns, rates of return, profit margin Think breaks, problem sets and exams this year, old final exams Look at old exams to see the types of major concepts to know

16. Taxes, Business Arrangements, and Asset Transfers Look over old exams and problem set, focusing on the issues that stay the same, not details that vary Basic idea of how taxes work: Revenue minus Costs Benefit of Section 179 Gain = Sale Price – Basis What triggers recognition of gain? Sell/buy or give/receive assets? Contribute to or remove from LLC or Corporation Why does Basis change? (Death, Depreciation)

17. Taxes, Business Arrangements, and Asset Transfers Types of Taxes Ordinary income, self-employment, capital gain, gift Types of Business Arrangements Sole proprietor, partnership, corporation (C or S), limited liability company (LLC) Main differences: Formation, Taxation, Liability

18. Exam Study Many questions on material from the first 2 exams: Comprehensive Exam Focus on Key Concepts Big picture, not details Basic things to remember 5 years from now New Material an important focus See slides above Email best: pdmitchell@wisc.edupdmitchell@wisc.edu Contact me with Questions