CFA Level I · CFA Level I Exam · Natural Resources
Compared with timberland, farmland returns are most likely to be more sensitive to which of the following?
Farmland returns are more sensitive to annual crop yields and agricultural commodity prices. Crops are harvested each season, so weather and prices feed directly into income, whereas timberland owners can defer harvest and rely on long-term biological growth.
- AAnnual crop yields and agricultural commodity pricesCorrect
- BThe ability to defer harvest for many years
- CBiological growth over decades-long rotations
Explanation
Farmland produces annual crops, so income depends on yields and commodity prices each season, and weather matters. Timberland offers harvest deferral and multi-decade biological growth, which reduce short-term sensitivity.
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