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Escalating worldwide demand for corn has led to a sharp [#permalink]
12 Jun 2005, 20:17
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Escalating worldwide demand for corn has led to a sharp increase in the market price of corn, and corn prices are likely to remain high. Corn is extensive used as feed for livestock, and because profit margins are tight in the livestock business, many farmers are expected to leave the business. With fewer suppliers, meat prices will surely rise. Nonetheless, observers expect an immediate short-term decrease in meat prices.
Which of the following, if true, most helps to justify the observersâ€™ expectation?
A) The increase in corn prices is due more to a decline in the supply of corn than to a growth in demand for it.
B) Generally, farmers who are squeezed out of the livestock business send their livestock to market much earlier than they otherwise would.
C) Some people who ate meat regularly in the past are converting to diets that include little or no meat.
D) As meat prices rise, the number of livestock producers is likely to rise again.
E) Livestock producers who stay in the business will start using feed other than corn more extensively than they did in the past.
Going through the options:
A is irrelevant
B...i thought about B but dismissed it initially because its not necessary that just cause they sell their livestock early, that they sell it for a lower price
D...this talks about the future, while the observation is about immediate short-term decrease
E...doesn't prove anything
Thus, since i can't find any other valid answer, i go back to B which i guess is the only one that could fit (though i'm not totally convinced)
Only B is right
A) Low supply or high demand both lead to the same thing: an increase in price. However, this does not explain the discrepancy at hand
B) It does not matter whether price is lower as clouds said. The fact is that the livestock of squeezed producers will inevitably decrease prices and this explains the whole discrepancy.
C) A change in eating trends will NOT affect short term price change. This is a secular rather than a cyclical change.
D) Does not explain the discrepancy between short term prices and long term expectations
E) Again, this is a secular change which does not explain short term changes